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, 2002

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:
                                      None
                                (Title of class)

           Securities registered pursuant to Section 12(g) 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)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.            Yes     X                 No

Indicate by check mark if 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  $5,665,129 on March 25, 2003 (based on the closing
price per share as reported on the OTC Bulletin Board).

The number of outstanding  shares of the  registrant's  Common Stock as of March
28, 2003 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 Statement for the 2003 annual meeting of              Part III of Form10-K
shareholders

<PAGE>

                               PRIME RETAIL, INC.
                                    Form 10-K
                                December 31, 2002

                                TABLE OF CONTENTS
                                -----------------

Part I                                                                    Page
------                                                                    -----

Item 1.       Business........................................................1
Item 2.       Properties......................................................5
Item 3.       Legal Proceedings...............................................8
Item 4.       Submission of Matters to a Vote of
              Security Holders................................................9

Part II
-------
Item 5.       Market for Registrant's Common Equity and
              Related Shareholder Matters.....................................10
Item 6.       Selected Financial Data.........................................11
Item 7.       Management's Discussion and Analysis of
              Financial Condition and Results of Operations...................13
Item 7A.      Quantitative and Qualitative Disclosures About
              Material Risk...................................................34
Item 8.       Financial Statements and Supplementary Data.....................34
Item 9.       Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure..........................34

Part III
--------
Item 10.      Directors and Executive Officers of the Registrant..............35
Item 11.      Executive Compensation..........................................35
Item 12.      Security Ownership of Certain Beneficial Owners and
              Management and Related Stockholder Matters......................35
Item 13.      Certain Relationships and Related Transactions..................35

Part IV
-------
Item 14.      Controls and Procedures.........................................36
Item 15.      Exhibits, Financial Statement Schedules and Reports
              on Form 8-K.....................................................36

Other
-----
              Signatures......................................................42
              Certifications..................................................43

<PAGE>
                                   Page - (1)

                                     PART I

                                ITEM 1 - BUSINESS

The Company

     Prime Retail, Inc. (the "Company") was organized as a Maryland  corporation
on July 16,  1993.  We are a  self-administered  and  self-managed  real  estate
investment trust ("REIT") that primarily owns and operates outlet centers. As of
December 31, 2002, our outlet center portfolio,  including nine properties owned
through   unconsolidated   joint  ventures,   consists  of  38  properties  (the
"Properties") in 24 states, which total 10,269,000 square feet of gross leasable
area ("GLA").  As a  fully-integrated  real estate firm, we provide  accounting,
finance,  leasing,  marketing and management services for the Properties.  Prime
Retail, L.P. (the "Operating Partnership"),  a Delaware limited partnership,  is
the  entity  through  which we conduct  substantially  all of our  business  and
operations and own (either directly or through  subsidiaries)  substantially all
of our assets including the Properties.  We control the Operating Partnership as
its sole  general  partner and are  dependent  upon the  distributions  or other
payments from the Operating Partnership to meet our financial obligations.

     Unless the context otherwise requires,  all references to "we," "us," "our"
or the "Company"  herein mean Prime  Retail,  Inc. and those  entities  owned or
controlled  by  Prime  Retail,  Inc.,   including  the  Operating   Partnership.
Additionally, our website can be accessed at www.primeretail.com.  A copy of our
Annual Report on Form 10-K,  Quarterly  Reports on Form 10-Q and Current Reports
on Form 8-K,  as filed  with the  Securities  and  Exchange  Commission,  can be
obtained  free of charge on our website.  Our  principal  executive  offices are
located at 100 East Pratt Street, 19th Floor, Baltimore,  Maryland 21202 and our
telephone number is 410-234-0782.

Tax Status

     We have 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, we generally
are not  subject  to  federal  income  tax at the  corporate  level on income we
distribute  to our  stockholders  so long as we  distribute  at least 90% of our
taxable  income  (excluding  any net capital gain) each year.  Since our initial
public offering ("IPO") on March 22, 1994, we believe that we have complied with
the tax regulations to maintain our status as a REIT. If we fail to qualify as a
REIT in any taxable  year, we will be subject to federal  income tax  (including
any  applicable  alternative  minimum  tax) on our  taxable  income  at  regular
corporate  rates.  Even if we  qualify  as a REIT,  we may be subject to certain
state and local taxes on our income and property.

Business of the Company

     We  are  engaged  primarily  in  the  ownership,   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  we  later  acquired  certain
Properties and simultaneously assumed management and development operations with
the  completion of our IPO), we have become a  significant  owner,  operator and
developer in the outlet center sector.  Our outlet centers feature a diversified
mix  of  nationally   recognized   manufacturers  of  designer  and  brand  name
merchandise with which we have long-standing  relationships.  As of December 31,
2002,  our outlet  center  portfolio  consisted  of 38  properties  in 24 states
totaling  10,269,000  square  feet of GLA.  The  average  outlet  center  in our
portfolio  contained  approximately  270,327  square feet of GLA at December 31,
2002.

Business Strategy

     Our current  strategy is to use the cash flow from the  Properties  to fund
property level  improvements and reduce debt levels over time. We have, and will
continue to pursue, on a selective basis, the disposition  (e.g.,  sales,  joint
venture   arrangements   and/or  potential  givebacks  to  lenders)  of  certain
properties  in order to reduce our  overall  leverage  and  generate  additional
liquidity.  See Item 7 -  "Management's  Discussion  of Financial  Condition and
Results of Operations" contained herein for recent developments.

<PAGE>
                                   Page - (2)

     We actively manage the Properties in an effort to maintain and increase the
sales and profitability of our merchants and ultimately improve occupancy levels
and rental  income.  In this regard we have  employed  and will  employ  various
strategies, including the following:

o    Tenant Mix. We 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.  We believe
     that an increase in the  representation of such tenants  positively affects
     consumer  traffic  and  leads to  overall  higher  sales  for all  tenants.
     Additionally,  we will  continue to explore the  addition of new tenants to
     the outlet sector to strengthen our competitive position.

o    Marketing Strategies.  We operate the majority of our current outlet center
     portfolio  under the "Prime  Outlets" brand name. In addition to the "Prime
     Outlets"   brand  name,  we  use  on-site   management   teams  to  develop
     individualized  property  specific  marketing  programs.  We often  augment
     marketing dollars received from tenants with our own contributions. We have
     and will continue to evaluate our marketing  programs and make enhancements
     as appropriate.  Furthermore,  we will continue to seek strategic marketing
     alliances  with  companies  who desire to utilize the customer  base of our
     outlet center portfolio.

o    Operating  Expenses.  Generally,  we manage and lease our  properties  with
     in-house  personnel,  thereby reducing our reliance on third-party  service
     providers and enabling us to  continually  monitor and control the expenses
     associated with these  functions.  We strive to minimize the occupancy cost
     of our tenants  through  active  management  of  operating  expenses at the
     property, regional and corporate levels. Whenever possible, we leverage the
     size of our portfolio to obtain favorable rates from vendors and suppliers.

Competition

     Our  outlet  centers  compete  for  customers  primarily  with  traditional
shopping malls,  "off-price"  retailers and other outlet centers. The tenants of
outlet centers usually attempt to avoid direct  competition with major retailers
and their own  full-price  stores.  They generally  accomplish  this by locating
outlet stores only in outlet centers at least 20 miles from the nearest regional
mall.  For this  reason,  our outlet  centers  are often  located in  relatively
undeveloped  areas  and,  therefore,  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 our outlet  centers,  our outlet
centers also compete with web-based and catalogue retailers for customers.

     Because  a  number  of  our  outlet   centers  are  located  in  relatively
undeveloped   areas,   there  are  often  other   potential   sites  for  retail
opportunities near our outlet centers that may be developed by competitors.  The
existence or development of other retail venues with a more convenient  location
or the offer of lower rent may  attract  our  tenants or cause them to seek more
favorable  lease  terms at or  prior to  renewal  of their  leases  with us and,
accordingly, may affect adversely the business, revenues and sales volume of our
outlet centers.

     In addition, the success of tenants in our outlet centers which are located
in relatively  undeveloped  areas, and, thus, the success of such outlet centers
themselves,  depends on shoppers  traveling  significant  distances to shop.  If
shoppers should become less willing to travel the distances necessary to shop at
our remote outlet  centers,  the business of our tenants  would likely  decline.
Such a decline would likely cause the value, business,  revenue and sales volume
of such outlet centers to decline.

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 our
ownership and operation of the Properties,  we may be potentially liable for the
costs of removal or remediation of hazardous substances.

     We have  no  knowledge,  nor  have we  been  notified  by any  governmental
authority,  of any  material  noncompliance,  liability  or  claim  relating  to
hazardous substances in connection with any properties,  in which we now have 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 us.

Insurance

     We believe that each of the  Properties  is adequately  insured,  including
coverage  for  liability,  fire,  flood,  earthquake,   terrorism  and  property
insurance.  Such insurance policies are provided by reputable companies and have
commercially reasonable deductibles and limits.

<PAGE>
                                   Page - (3)

Employees

     As of  December  31,  2002,  we had 656  employees.  We  believe  that  our
relations with employees are satisfactory.

Liquidity

     Our liquidity  depends on cash provided by operations and potential capital
raising  activities  such as funds  obtained  through  borrowings,  particularly
refinancing of existing debt, and cash generated  through asset sales.  Although
we believe that  estimated  cash flows from  operations  and  potential  capital
raising  activities will be sufficient to satisfy our scheduled debt service and
other  obligations and sustain our operations for the next year, there can be no
assurance  that we will be successful in obtaining the required  amount of funds
for these items or that the terms of the potential  capital raising  activities,
if they should  occur,  will be as  favorable  as we have  experienced  in prior
periods.

     During 2003,  our first  mortgage and expansion loan (the "Mega Deal Loan")
matures on  November  11,  2003.  The Mega Deal  Loan,  which is secured by a 13
property collateral pool, had an outstanding  principal balance of approximately
$263.8  million as of December  31, 2002 and will  require a balloon  payment of
approximately $260.7 million at maturity.  Based on our initial discussions with
various prospective  lenders, we are currently  projecting a potential shortfall
with  respect to  refinancing  the Mega Deal  Loan.  However,  we  believe  this
shortfall may be alleviated  through  potential asset sales and/or other capital
raising activities,  including the placement of mezzanine level debt. We caution
that our assumptions are based on current market conditions and, therefore,  are
subject to  various  risks and  uncertainties,  including  changes  in  economic
conditions  which may  adversely  impact our ability to refinance  the Mega Deal
Loan at  favorable  rates or in a  timely  and  orderly  fashion,  or which  may
adversely impact our ability to consummate  various asset sales or other capital
raising activities.

     In connection  with the  completion of the sale of six outlet  centers (the
"Bridge  Properties") in July 2002, we guaranteed to FRIT PRT Bridge Acquisition
LLC ("FRIT")  (i) a 13% return on its  approximately  $17.2  million of invested
capital,  and (ii) the full  return  of its  invested  capital  (the  "Mandatory
Redemption  Obligation")  in FP  Investment,  LLC by December  31,  2003.  As of
December 31, 2002,  the Mandatory  Redemption  Obligation  (included in accounts
payable and other  liabilities in the accompanying  Consolidated  Balance Sheet)
was  approximately  $16.2 million.  See Note 3 - "Property  Dispositions" of the
Notes to  Consolidated  Financial  Statements  contained  herein for  additional
information.  Although we are in the  process of seeking to generate  additional
liquidity to repay the Mandatory  Redemption  Obligation through (i) the sale of
FRIT's ownership  interest in the Bridge Properties and/or (ii) the placement of
additional indebtedness on the Bridge Properties, there can be no assurance that
we will be able to complete such capital raising activities by December 31, 2003
or that such capital  raising  activities,  if they should occur,  will generate
sufficient  proceeds  to repay  the  Mandatory  Redemption  Obligation  in full.
Failure to repay the Mandatory Redemption  Obligation by December 31, 2003 would
constitute  a default,  which  would  enable  FRIT to  exercise  its rights with
respect to the collateral  pledged as security to the guarantee,  including some
of our partnership interests in the 13 property collateral pool under the
aforementioned Mega Deal Loan.

     See Item 7 - "Management's Discussion of Financial Condition and Results of
Operations" contained herein for additional information.

Executive Officers

     The  following  table  sets  forth  the name and  position  of the  current
executive officers of the Company as of the date of this filing along with their
age as of December 31, 2002:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Name                                  Position                                                                Age
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                           <C>
Glenn D. Reschke                      Chief Executive Officer and Chairman of the Board                       51
Robert A. Brvenik                     President, Chief Financial Officer and Treasurer                        47
R. Kelvin Antill                      Executive Vice President - General Counsel                              43
                                           and Secretary
David G. Phillips                     Executive Vice President - Leasing, International                       41
                                           and New Business Development
Frederick J. Meno, IV                 Senior Vice President - Operations & Marketing                          45

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

<PAGE>
                                   Page - (4)

     Glenn D. Reschke.  Glenn D. Reschke is Chief Executive Officer and Chairman
of the  Board of  Directors  of Prime  Retail,  Inc.  Reporting  to the Board of
Directors,  Mr. G. Reschke is  responsible  for all aspects of the Company,  its
outlet  centers and other  properties  and all of its  employees,  including the
leasing,  operations,   marketing,   development,   finance  and  administrative
functions.  In  addition,  Mr. G.  Reschke is  responsible  for  developing  and
implementing  the  long-term  strategic  goals and  objectives of the Company as
approved  by the Board of  Directors.  Mr. G.  Reschke  has been a member of the
Board of  Directors  since  1997.  Mr. G.  Reschke  became  President  and Chief
Operating  Officer of the  Company on October 6, 1999;  acting  Chief  Executive
Officer of the Company on February 25,  2000;  and Chief  Executive  Officer and
Chairman  of the Board of  Directors  of the  Company on July 19,  2000.  Mr. G.
Reschke relinquished his duties as President to Mr. Brvenik effective August 15,
2002.  From the inception of the Company in 1994 through October 6, 1999, Mr. G.
Reschke served as Executive Vice President--Development and Acquisitions.  Prior
to his employment by the Company, Mr. G. Reschke worked for PGI, which he joined
in 1983 and served as Vice  President,  Senior Vice President and Executive Vice
President.  Mr.  G.  Reschke  was  responsible  for PGI's  multi-family,  senior
housing, single family and land development divisions. Mr. G. 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. Mr. G. Reschke is the brother of Michael W. Reschke, a member of
the Board of Directors of the Company.

     Robert A. Brvenik. Robert A. Brvenik is President,  Chief Financial Officer
and Treasurer of the Company. Mr. Brvenik joined the Company on June 15, 2000 as
Executive Vice  President,  Chief Financial  Officer and Treasurer.  Mr. Brvenik
assumed the duties of President of the Company effective August 15, 2002. In his
role as  President,  Mr.  Brvenik  is  responsible  for  many  of the  Company's
day-to-day operations including oversight of its finance, accounting and leasing
departments.   As  Chief  Financial   Officer  and  Treasurer,   Mr.   Brvenik's
responsibilities   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.

     R. Kelvin  Antill.  R. Kelvin Antill is Executive  Vice President - General
Counsel and Secretary of the Company. Mr. Antill assumed his current position on
January 31, 2002.  Since joining the Company in 1995,  Mr. Antill served as Vice
President--Assistant  General  Counsel and Assistant  Secretary  from 1995 until
July 2000 and Senior Vice  President--Assistant  General  Counsel and  Assistant
Secretary from July 2000 until January 2002.  Prior to joining the Company,  Mr.
Antill  was  associated  for  three  years  with  Ballard,  Spahr,  Andrews  and
Ingersoll,  and for four years  prior to that with  Frank,  Bernstein,  Conway &
Goldman,  both  based  in  Baltimore,  Maryland.  Mr.  Antill  received  a Juris
Doctorate  from the  University  of Virginia and a Bachelor of Arts in Economics
with an additional  emphasis in Government  and Politics from the  University of
Maryland at College Park. Mr. Antill is licensed to practice law in the state of
Maryland.

     David G. Phillips. David G. Phillips is Executive Vice President - Leasing,
International  and New Business  Development  of the Company.  From July 1999 to
January  2002,  Mr.  Phillips was  Executive  Vice  President of the Company and
President  of Prime  Retail  Europe  pursuant to which he oversaw the  Company's
development,  marketing,  leasing  and  operations  efforts in Europe.  Prior to
becoming  President of Prime Retail  Europe,  Mr.  Phillips was  Executive  Vice
President--Leasing  of the  Company  from 1994 to 1996 and then  Executive  Vice
President--Operations,  Marketing  and  Leasing of the  Company  from 1996 until
1999. From 1989 to 1994, Mr. Phillips was Vice President--Director of Leasing of
PGI.  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
degree in Real Estate  Development from Johns Hopkins  University and 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.

     Frederick J. Meno,  IV.  Frederick J. Meno,  IV is Senior Vice  President -
Operations & Marketing. Mr. Meno joined the Company in January of 1999 and he is
responsible for supervising the management, operations, construction management,
marketing and specialty  leasing programs for the Company's  portfolio of outlet
centers.  Prior to joining  the  Company,  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/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  Center  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 was the 2001 Dean for
ICSC's University of Shopping Centers School of Outlet Retailing, Value Oriented
and Community Centers.

<PAGE>
                                   Page - (5)


                               ITEM 2 - PROPERTIES

General

     As a  fully-integrated  real estate company,  we provide finance,  leasing,
accounting,  marketing  and  management  services  for  all of  our  Properties,
including those which we have an ownership interest through unconsolidated joint
ventures.  At December 31, 2002, our portfolio of Properties consisted of (i) 38
outlet centers  aggregating  10,269,000 square feet of GLA (including  2,789,000
square  feet  of  GLA at  outlet  centers  owned  through  unconsolidated  joint
ventures) and (ii) 154,000 square feet of GLA of office space.

     The table set forth below  summarizes  certain  information with respect to
our outlet  centers as of December 31, 2002 (see Note 6 - "Debt" of the Notes to
the  Consolidated  Financial  Statements  contained  herein for information with
respect to mortgage indebtedness on our Properties).

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Grand                GLA          Occupancy
Outlet Centers                                                                 Opening Date          (Sq. Ft.)     Percentage (1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                       <C>                     <C>
Prime Outlets at Fremont-- Fremont, Indiana                                    October 1985            229,000                90%

Prime Outlets at Birch Run (2)-- Birch Run, Michigan                         September 1986            724,000                93

Prime Outlets at Latham-- (3) Latham, New York                                  August 1987             43,000                83

Prime Outlets at Williamsburg (2)-- Williamsburg, Virginia                       April 1988            274,000                99

Prime Outlets at Pleasant Prairie-- Kenosha, Wisconsin                       September 1988            269,000                98

Prime Outlets at Burlington-- Burlington, Washington                               May 1989            174,000                90

Prime Outlets at Queenstown-- Queenstown, Maryland                                June 1989            221,000                99

Prime Outlets at Hillsboro-- Hillsboro, Texas                                  October 1989            359,000                96

Prime Outlets at Oshkosh-- Oshkosh, Wisconsin                                 November 1989            260,000                93

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

Prime Outlets at Perryville-- Perryville, Maryland                                June 1990            148,000                96

Prime Outlets at Sedona-- (5) Sedona, Arizona                                   August 1990             82,000                95

Prime Outlets at San Marcos-- San Marcos, Texas                                 August 1990            549,000                97

Prime Outlets at Anderson-- (3) Anderson, California                            August 1990            165,000                95

Prime Outlets at Post Falls-- (5) Post Falls, Idaho                               July 1991            179,000                68

Prime Outlets at Ellenton-- Ellenton, Florida                                  October 1991            481,000                98

Prime Outlets at Morrisville-- Raleigh - Durham, North Carolina                October 1991            187,000                75

Prime Outlets at Naples-- Naples/Marco Island, Florida                        December 1991            146,000                85

Prime Outlets at Niagara Falls USA-- Niagara Falls, New York                      July 1992            534,000                92

Prime Outlets at Woodbury-- (6) Woodbury, Minnesota                               July 1992            250,000                75

Prime Outlets at Calhoun-- (3) Calhoun, Georgia                                October 1992            254,000                91

Prime Outlets at Bend-- (5) Bend, Oregon                                      December 1992            132,000               100

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

Prime Outlets at Gainesville-- Gainesville, Texas                               August 1993            316,000                74
</TABLE>

<PAGE>
                                   Page - (6)

<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Grand                GLA          Occupancy
Outlet Centers                                                                 Opening Date          (Sq. Ft.)     Percentage (1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                    <C>                      <C>
Prime Outlets at Grove City-- Grove City, Pennsylvania                          August 1994            533,000               100%

Prime Outlets at Huntley-- Huntley, Illinois                                    August 1994            282,000                71

Prime Outlets at Florida City-- Florida City, Florida                        September 1994            208,000                70

Prime Outlets at Pismo Beach-- Pismo Beach, California                        November 1994            148,000               100

Prime Outlets at Tracy-- Tracy, California                                    November 1994            153,000                97

Prime Outlets at Odessa-- Odessa, Missouri                                        July 1995            296,000                76

Prime Outlets at Darien (7)-- Darien, Georgia                                     July 1995            307,000                65

Prime Outlets at Gulfport (8)-- Gulfport, Mississippi                         November 1995            306,000                88

Prime Outlets at Lodi--  (3)Burbank, Ohio                                     November 1996            313,000                87

Prime Outlets at Gaffney (3) (7)--  Gaffney, South Carolina                   November 1996            305,000                99

Prime Outlets at Lee-- (3) Lee, Massachusetts                                     June 1997            224,000                96

Prime Outlets at Lebanon--  Lebanon, Tennessee                                   April 1998            229,000                98

Prime Outlets at Hagerstown (2)--  Hagerstown, Maryland                         August 1998            487,000               100
                                                                                                    ----------               ---

Total Outlet Centers (9)                                                                            10,269,000                90%
                                                                                                    ==========               ===
====================================================================================================================================
</TABLE>
Notes:
(1)  Percentage reflects occupied space  as of December 31, 2002 as a percent of
     available square feet of GLA.
(2)  Through affiliates,  we  have a 30% ownership interest in the joint venture
     partnership that owns this outlet center.
(3)  Through affiliates,  we  have  an  18.2%  ownership  interest  in the joint
     venture partnership that owns this outlet center.
(4)  We own a 2%  partnership  interest  as the  sole  general  partner  in this
     property, but are entitled to 99% of the property's operating cash flow and
     net proceeds from a sale or refinancing.  This mixed-use  development  also
     includes approximately 154,000 square feet of office space, not included in
     this table, which was 95% occupied as of December 31, 2002.
(5)  Non-recourse mortgage loans  cross-collateralized by Prime Outlets at Bend,
     Prime  Outlets at Post Falls and Prime  Outlets at Sedona are  currently in
     default  and we are  in  the  process  of  negotiating  a  transfer  of our
     ownership  interests  in these outlet  centers to the lender.  See Note 6 -
     "Debt" of the Notes to  Consolidated  Financial  Statements  for additional
     information.
(6)  Non-recourse  mortgage  loans on Prime  Outlets  at Vero  Beach  and  Prime
     Outlets at Woodbury  were  cross-collateralized.  The lender  foreclosed on
     Prime  Outlets  at Vero  Beach  on  September  9,  2002.  We are  currently
     negotiating  the  transfer of our  ownership  interest in Prime  Outlets at
     Woodbury with the lender.  See Note 6 - "Debt" of the Notes to Consolidated
     Financial Statements for additional information.
(7)  We  operate  this  outlet center pursuant to a long-term ground lease under
     which we receive the economic benefit of a 100% ownership interest.
(8)  The real  property on which this  outlet  center is located is subject to a
     long-term ground lease.
(9)  Excludes Oxnard Factory Outlet.  Through an  affiliate, we have a 50% legal
     ownership interest in the joint  venture  partnership that owns this outlet
     center. However, we are currently receiving  no  economic  benefit from the
     Oxnard Factory Outlet.

Lease Terms

     In general,  the leases  relating to our outlet centers have terms of three
to five  years.  The  majority of leases  provide for the payment of  percentage
rents for  annual  sales in excess of certain  thresholds.  In  addition,  lease
agreements generally provide for (i) the recovery of a merchant's  proportionate
share of actual  costs of  common  area  maintenance  ("CAM"),  refuse  removal,
insurance,  and real estate  taxes,  (ii) a  contribution  for  advertising  and
promotion and (iii) an administrative fee. CAM includes items such as utilities,
security, parking lot cleaning,  maintenance and repair of common areas, capital
replacement  reserves,   landscaping,   seasonal  decorations,  public  restroom
maintenance  and certain  administrative  expenses.  We continually  monitor our
lease provisions in light of current and expected economic  conditions and other
factors.  In this regard,  we may consider  alternative  lease provisions (e.g.,
fixed CAM) where appropriate.

<PAGE>
                                   Page - (7)

     The  following  table sets forth,  as of December  31,  2002,  tenant lease
expirations,  assuming that none of the tenants  exercises  any renewal  option,
over the next 10 years  for our  outlet  center  portfolio,  including  9 outlet
centers we own through  unconsolidated joint ventures, but excluding four outlet
centers  secured by  non-recourse  mortgage  indebtedness  that is  currently in
default (see "Defaults on Certain Non-recourse Mortgage  Indebtedness" in Note 6
- "Debt" of the Notes to Consolidated  Financial Statements contained herein for
additional information):

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

                                                                                                          % of Total
                                    Number of                                     Annualized               Annualized
                                       Leases             Approximate             Minimum Rent           Minimum Rent of
Year                                 Expiring            GLA (Sq. Ft.)         of Expiring Leases         Expiring Leases
-------                        -----------------       ------------------     ---------------------    -----------------------------
<S>                                    <C>               <C>                   <C>                            <C>
 2003                                  560               2,224,432             $ 23,045,116                   21.25%
 2004                                  457               1,787,527               21,164,320                   19.52%
 2005                                  335               1,385,992               19,500,907                   17.98%
 2006                                  225                 904,911               13,718,451                   12.65%
 2007                                  200                 852,756               13,345,631                   12.31%
 2008                                  115                 514,380                6,743,522                    6.22%
 2009                                   22                 108,351                1,583,008                    1.46%
 2010                                   37                 231,567                3,149,311                    2.90%
 2011                                   32                 183,338                2,709,736                    2.50%
 2012                                   25                 105,445                1,692,392                    1.56%
====================================================================================================================================
</TABLE>

Tenants

     In our view,  tenant mix is an important  factor in  determining  an outlet
center's  success.  Our outlet  centers are  managed to attract  and retain,  if
possible,   a  diverse  mix  of  nationally   and   internationally   recognized
manufacturers of moderate to 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  potentially  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  generally are placed in strategic
locations  designed to draw  customers  into the outlet  center and to encourage
them to shop at more than one store.  We  continually  examine the  placement of
tenants within each center and, in  collaboration  with our tenants,  adjust the
size and  location  of their  spaces  within each center in an effort to improve
sales per square foot.

     Effective  January 1, 2002,  we adopted  Statement of Financial  Accounting
Standards  ("FAS No.  144"),  "Accounting  for the  Impairment  or  Disposal  of
Long-Lived  Assets." In accordance with the requirements of FAS No. 144, we have
reclassified the operating results,  including gains or losses from disposition,
of certain  property  either  disposed of or  classified as assets held for sale
during  2002  as  discontinued  operations  in  the  accompanying   Consolidated
Statements of Operations for all periods presented.  The following discussion is
reflective of the reclassifications made pursuant to the requirements of FAS No.
144 and relates to our operating results from continuing operations.  During the
year ended December 31, 2002, no group of tenants under common control accounted
for more than 4.6% of our gross  revenues  or leased more than 5.6% of our total
GLA.  During the years ended December 31, 2002 and 2001, our total provision for
uncollectible  accounts  receivable  ("bad debt expense"),  which is included in
other charges in the  accompanying  Consolidated  Statements of Operations,  was
approximately  $1.9  million,  or 1.2%,  and  $9.0  million,  or 4.9%,  of total
revenues,  respectively.  Bad debt  expense  is  mainly  attributable  to tenant
bankruptcies, disputes, abandonments and store closings.

<PAGE>
                                   Page - (8)

                           ITEM 3 - LEGAL PROCEEDINGS

     Except  as  described  below,  neither  we nor  any of our  properties  are
currently  subject to any  material  litigation,  nor to our  knowledge,  is any
material  or  other  litigation   threatened  against  us,  other  than  routine
litigation arising in the ordinary course of business, some of which is expected
to be  covered  by  liability  insurance  and all of which  collectively  is not
expected to have an adverse effect on our consolidated financial statements.

     The  Company  and its  affiliates  were  defendants  in a lawsuit  filed by
Accrued  Financial  Services ("AFS") on August 10, 1999 in the Circuit Court for
Baltimore  City. The lawsuit was removed to United States District Court for the
District of Maryland (the "U.S. District Court") on August 20, 1999. AFS claimed
that  certain  tenants  had  assigned to AFS their  rights to make claims  under
leases such  tenants  had with  affiliates  of the Company and alleged  that the
Company and its affiliates  overcharged such tenants for common area maintenance
charges and  promotion  fund  charges.  The U.S.  District  Court  dismissed the
lawsuit on June 19, 2000. AFS appealed the U.S. District Court's decision to the
United States Court of Appeals for the Fourth Circuit. Briefs were submitted and
oral argument before a panel of judges of the United States Court of Appeals for
the Fourth  Circuit  was held on October  30,  2001,  during  which the panel of
judges  requested  further  briefing of certain  issues.  On July 29, 2002,  the
Fourth Circuit affirmed the dismissal. AFS filed a request for further review by
the Fourth  Circuit  which  request was  denied.  In January  2003,  AFS filed a
petition for a writ of  certiorari  by the United  States  Supreme Court and the
Company filed its opposition on February 24, 2003.  The Company  believes it has
acted properly and will continue to defend the suit vigorously if AFS's petition
is granted.  Nevertheless,  if the AFS writ of  certiorari  is  successful,  the
outcome of this lawsuit and the ultimate  liability of the  defendants,  if any,
cannot be predicted at this time.

     In addition,  certain tenants in the Company's and its  affiliates'  outlet
centers have made or may make  allegations  concerning  overcharging for CAM and
promotion fund charges  because of varying  clauses in their leases  pursuant to
which they claim under various  circumstances that they were not required to pay
some or all of the  pass-through  charges.  Such  claims if  asserted  and found
meritorious,  could have a material affect on the Company's financial condition.
Determination  of whether  liability  would exist to the Company would depend on
interpretation  of various lease clauses  within a tenant's lease and all of the
other leases at each center  collectively.  To date such issues have been raised
and resolved with Dinnerware Plus Holdings, Inc. ("Mikasa"),  Melru Corporation,
Designs,  Inc. and Brown Group Retail, Inc., all of which at one time or another
were in litigation, or threatened litigation with the Company. During the second
quarter of 2002,  the Company  recorded a  non-recurring  charge to  establish a
reserve  in the amount of $3.0  million  for  resolution  of these  matters,  in
addition to the Mikasa matter referred to above.  This reserve which is included
in the accounts payable and other  liabilities in the accompanying  Consolidated
Balance  Sheet  as  of  December  31,  was  estimated  in  accordance  with  our
established policies and procedures concerning loss contingencies (see "Critical
Accounting  Policies  and  Estimates"  of Item 2 -  "Management  Discussion  and
Analysis of  Financial  Condition  and  Results of  Operations"  for  additional
information). The balance of the unused reserve is approximately $2.4 million as
of December 31,  2002.  Based on presently  available  information,  the Company
believes it is probable  this  reserve  will be utilized  over the next  several
years in resolving  claims relating to the  pass-through  and  promotional  fund
provisions  contained in its leases. The Company cautions,  however,  that given
the inherent uncertainties of litigation and the complexities  associated with a
large number of leases and other  factual  questions at issue,  actual costs may
vary from this  estimate.  No other such  tenant,  however,  has filed a suit or
indicated  to the Company that it intends to file as suit.  Nevertheless,  it is
too early to make any  predictions  as to whether the Company or its  affiliates
may be found liable with respect to other tenants,  or to predict damages should
liability be found.

     Affiliates of the Company  routinely file lawsuits to collect past rent due
from, and to evict,  tenants which have defaulted under their leases.  There are
currently dozens of such actions pending.  In addition to defending  against the
Company's   affiliates'   claims  and  eviction   actions,   some  tenants  file
counterclaims  against  the  Company's  affiliates.  A tenant  who files  such a
counterclaim typically claims that the Company's affiliate which owns the outlet
center in question has defaulted under the tenant's  lease,  has overcharged the
tenant for CAM and promotion fund charges,  made  misrepresentations  during the
leasing  process,  or has failed to  maintain  or market  the  outlet  center in
question as  required by the lease.  One such case  involves a  collections  and
eviction  action in Puerto Rico captioned  Outlet Village of Puerto Rico Limited
Partnership,  S.E.  v.  WEPA,  Inc.,  and  another,  for  instance,  involves  a
collection case in San Marcos, Texas, captioned, San Marcos Factory Stores, Ltd.
v. SM Collectibles,  Inc. d/b/a Country Clutter.  Usually such counterclaims are
without  merit.  In  response to such  counterclaims  the  Company's  affiliates
usually  continue to pursue  their  collection  or  eviction  actions and defend
against the counterclaims.  Despite the fact that the Company and its affiliates
believe such counterclaims are without merit and defend against them vigorously,
the outcome of all such counterclaims,  and, thus, the liability, if any, of the
Company and its affiliates, cannot be predicted at this time.

<PAGE>
                                   Page - (9)

     Several entities (the "eOutlets  Plaintiffs")  filed or stated an intention
to file lawsuits (collectively, the "eOutlets Lawsuits") against the Company and
its affiliates  arising out of the Company's on-line venture,  primeoutlets.com.
inc.,  also  known as  eOutlets,  an  affiliate  of the  Company.  The  eOutlets
Plaintiffs seek to hold the Company and its affiliates responsible under various
legal theories for liabilities incurred by primeoutlets.com, inc., including the
theories that the Company  guaranteed  the  obligations of eOutlets and that the
Company was the  "alter-ego"  of eOutlets.  The Company  believes that it is not
liable to eOutlets Plaintiffs as there was no privity of contract between it and
the  various  eOutlets  Plaintiffs.  In the case  captioned  Convergys  Customer
Management Group, Inc. v. Prime Retail,  Inc. and  primeoutlets.com  inc. in the
Court of Common Pleas for Hamilton  County  (Ohio),  the Company  prevailed in a
motion to  dismiss  the  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.  In another  matter,  J. Walter  Thompson,  USA,  Inc. v. Prime
Retail,  L.P.  and Prime  Retail,  Inc.  the  Company  succeeded  in having  the
corporate veil piercing and alter ego claims dismissed and settled the remaining
claims in February  2003.  primeoutelts.com,  inc.  filed for  protection  under
Chapter 7 of the United  States  Bankruptcy  Code in  November of 2000 under the
name  E-Outlets  Resolution  Corp.  (the  "Debtor").  On November  5, 2002,  the
bankruptcy  trustee for the Debtor  brought suit against  Prime  Retail,  L.P. ,
Prime Retail, Inc., and Prime Retail E-Commerce,  Inc. (the "Entity Defendants")
and certain former  directors of the Debtor (the "Individual  Defendants").  The
Trustee  has  asserted  claims  of alter  ego,  promissory  estoppel,  breach of
contract,  breach of fiduciary  duty,  tortious  interference  with  prospective
business  advantage,  unjust  enrichment  and quantum  meruit against the Entity
Defendants  and  breach of  fiduciary  duty and  gross  negligence  against  the
individual defendants.  The Company has tendered the suit, both as to the Entity
Defendants and Individual  Defendants,  to its Directors' and Officers'  ("D&O")
insurance  carrier.  Motions  to  dismiss  the  suit  have  been  filed  by  all
Defendants.  All  Defendants  believe  the  suit is  without  merit  and plan on
defending it  vigorously.  Nevertheless,  the outcome of this  lawsuit,  and the
ultimate liability of the Company, if any, cannot be predicted at this time.

     In May, 2001, the Company,  through affiliates,  filed suit against Fru-Con
Construction,  Inc.  ("FCC"),  the lender on Prime  Outlets  at New River  ("New
River") as a result of FCC's  foreclosure  of New River due to the maturation of
the loan.  The Company  and its  affiliates  allege that they have been  damaged
because  of  FCC's  failure  to  dispose  of the  collateral  in a  commercially
reasonable  manner and as a result of a violation of federal trademark laws. The
Company,  through affiliates,  has also filed suit against The Fru-Con Projects,
Inc.  ("Fru-Con"),  a  partner  in  Arizona  Factory  Shops  Partnership  and an
affiliate of FCC. The Company and its  affiliates  allege that Fru-Con failed to
use reasonable  efforts to assist in obtaining  refinancing.  Fru-Con has claims
pending  against  the  Company  and its  affiliates,  as part of the same  suit,
alleging  that the Company  and its  affiliates  breached  their  contract  with
Fru-Con by not allowing  Fru-Con to  participate in an outlet project in Sedona,
Arizona (the "Sedona  Project") and breached a management and leasing  agreement
by managing and leasing the Sedona Project.  The Company believes its affiliates
and it  acted  property  and  FCC  did not act  properly.  The  Company  and its
affiliates  will  vigorously  defend the claims filed against them and prosecute
the claims they filed. Nevertheless, the ultimate outcome of the suit, including
the liability, if any, of the Company and its affiliates, cannot be predicted at
this time.

           ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

     Pursuant to our  Amended and  Restated  Articles of  Incorporation,  if and
whenever dividends payable on the Preferred Stock shall be in arrears for six or
more consecutive  quarterly periods, then the holders of Preferred Stock, voting
together  as  a  single  class,  shall  be  entitled  at  the  next  meeting  of
stockholders  or at any special  meeting  called for such purpose,  to elect two
additional directors (the "Preferred Directors") to our Board of Directors until
the full dividends  accumulated on all outstanding shares of the Preferred Stock
have been paid in full or declared and a sum of money sufficient for the payment
thereof set aside for payment.

     In December 2001, the holders of the Preferred  Stock elected Howard Amster
and Robert H.  Kanner as the  Preferred  Directors  with terms  expiring  at our
Annual  Meeting  of  Shareholders  in 2003 or until  their  successors  are duly
elected  and  qualified,  or, if earlier,  the date on which the full  dividends
accumulated on all outstanding  shares of Preferred Stock have been paid in full
or  declared  and a sum of money  sufficient  for  their  payment  set aside for
payment.  On July 12,  2002,  Mr.  Kanner  resigned as a Preferred  Director for
reasons unrelated to the company or management.

     At a special meeting of the holders of the Preferred Stock held on December
5, 2002,  Gary J.  Skoien  was  elected to  replace  Mr.  Kanner as a  Preferred
Director. Mr. Skoien will serve out the balance of Mr. Kanner's term.

<PAGE>
                                  Page - (10)

                                     PART II

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

     Our common stock trades on the OTC Bulletin  Board under the trading symbol
"PRME". Our common stock previously traded through September 26, 2001 on the New
York Stock Exchange under the trading symbol "PRT".

     The following  table sets forth the quarterly  high,  low and end of period
closing  sales  prices  per share of our  common  stock as  reported  on the OTC
Bulletin  Board and NYSE  during the years  ended  December  31,  2002 and 2001,
respectively. We did not pay any distributions during 2002 or 2001.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                          2002                                             2001
----------------------------------------------------------------------------------    ----------------------------------------------
<S>                                    <C>         <C>          <C>         <C>        <C>         <C>         <C>         <C>
                                       Fourth       Third       Second      First      Fourth      Third      Second        First
                                       Quarter     Quarter      Quarter    Quarter     Quarter     Quarter    Quarter      Quarter
Market price per common share:
  High                                 $ 0.17      $ 0.15       $ 0.17      $ 0.24     $ 0.20      $ 0.30      $ 0.42      $ 0.70
  Low                                    0.04        0.06         0.08        0.09       0.09        0.16        0.26        0.36
  End of period close                    0.12        0.06         0.12        0.18       0.10        0.17        0.27        0.39
====================================================================================================================================
</TABLE>

     To qualify as a REIT for federal  income tax  purposes,  we are required to
pay  distributions  to our common and preferred  shareholders of at least 90% of
our REIT taxable income in addition to satisfying other  requirements.  Although
we intend to make  distributions,  if necessary,  to remain  qualified as a REIT
under the Code,  we also intend to retain such amounts as we consider  necessary
from time to time for our capital and liquidity needs.

     Our policy  remains to pay  distributions  only to the extent  necessary to
maintain our status as a REIT for federal  income tax purposes.  During 2002, we
were not required to pay any  distributions in order to maintain our status as a
REIT and based on our current federal income tax  projections,  we do not expect
to pay any  distributions  during 2003.  We are currently in arrears on thirteen
quarters of preferred stock distributions due February 15, 2000 through February
15, 2003, respectively.

     We may not make distributions to our common  shareholders or our holders of
common  units of limited  partnership  interests  in the  Operating  Partnership
unless  we  are  current  with  respect  to   distributions   to  our  preferred
shareholders. As of December 31, 2002, unpaid dividends for the period beginning
on November 16, 1999 through  December 31, 2002 on our Series A Senior Preferred
Stock and Series B  Convertible  Preferred  Stock  aggregated  $18.9 million and
$52.0 million, respectively. The annualized dividends on our 2,300,000 shares of
Series A Senior  Preferred  Stock and  7,828,125  shares of Series B Convertible
Preferred Stock outstanding as of December 31, 2002 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 our common  stock was 561,
including participants in security position listings, as of March 11, 2003.

<PAGE>
                                  Page - (11)

                        ITEM 6 - SELECTED FINANCIAL DATA

                (Amounts in thousands, except per share amounts)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                  2002            2001             2000             1999            1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>              <C>              <C>              <C>
Statements of Operations Data (1):
Revenues
Base rents                                            $   86,184     $   113,546      $   151,605      $   166,828      $   126,319
Percentage rents                                           3,756           3,469            5,566            7,334            5,679
Tenant reimbursements                                     48,730          54,178           70,749           77,350           57,364
Interest and other                                        13,361          12,126           13,728           12,743            8,948
                                                      ----------     -----------      -----------      -----------      ------------
  Total revenues                                         152,031         183,319          241,648          264,255          198,310

Expenses
Property operating                                        42,446          44,472           58,494           61,581           45,742
Real estate taxes                                         12,931          15,054           17,655           18,587           13,499
Depreciation and amortization                             34,301          45,863           57,930           63,470           45,380
Corporate general and administrative                      14,562          14,290           21,581           12,687            7,980
Interest                                                  61,826          79,864           91,161           86,055           52,060
Other charges                                              8,684          19,632           22,907           13,204            5,218
Provision for asset impairment                            84,093          63,026           77,115           18,309                -
                                                      ----------     -----------      -----------      -----------      ------------
  Total expenses                                         258,843         282,201          346,843          273,893          169,879
                                                      ----------     -----------      -----------      -----------      ------------
Income (loss) before gain (loss) on sale of
  real estate and minority interests                    (106,812)        (98,882)        (105,195)          (9,638)          28,431
Gain (loss) on sale of real estate, net                    5,802          (1,063)         (42,648)         (15,153)         (15,461)
                                                      ----------     -----------      -----------      -----------      ------------
Income (loss) from continuing operations
  before minority interests                             (101,010)        (99,945)        (147,843)         (24,791)          12,970
Loss allocated to minority interests                           -             408              738           (3,226)          (2,456)
                                                      ----------     -----------      -----------      -----------      ------------
Income (loss) from continuing operations                (101,010)        (99,537)        (147,105)         (28,017)          10,514
Discontinued operations, including provision for
  asset impairment of $27,757 and net gain of
  $26,152 on dispositions in 2002                          1,942           1,489            4,653           (6,812)           7,016
                                                      ----------     -----------      -----------      -----------      ------------
Net income (loss)                                        (99,068)        (98,048)        (142,452)         (34,829)          17,530
Allocations to preferred shareholders                    (22,672)        (22,672)         (22,672)          (9,962)         (24,604)
                                                      ----------     -----------      -----------      -----------      ------------
Net loss applicable to common shares                  $ (121,740)    $  (120,720)     $  (165,124)     $   (44,791)     $    (7,074)
                                                      ==========     ===========      ===========      ===========      ===========

Basic loss per common share                           $    (2.79)    $     (2.77)     $     (3.79)     $     (1.04)     $     (0.20)
                                                      ==========     ===========      ===========      ===========      ===========

Diluted loss per common share                         $    (2.79)    $     (2.77)     $     (3.79)     $     (1.30)     $     (0.20)
                                                      ==========     ===========      ===========      ===========      ===========

Other Data:
Funds from operations (2)                             $   22,882     $    25,256      $    57,967      $    84,163      $    90,020
Net cash provided by operating activities                 30,124          32,911           32,450           97,815           59,182
Net cash provided by investing activities                 41,451           5,595            1,095          (56,666)        (145,596)
Net cash used in financing activities                    (72,204)        (39,875)         (31,982)         (39,571)          85,806
Distributions declared per common share (3)                    -               -                -            0.885            1.680
Reported merchant sales                                2,047,114       2,473,830        2,745,923        3,286,917        3,169,268

------------------------------------------------------------------------------------------------------------------------------------
December 31,                                              2002            2001             2000             1999            1998
------------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data:
Rental property before accumulated depreciation       $  854,862     $ 1,375,608      $ 1,493,107      $ 1,826,551      $ 2,015,722
Net investment in rental property                        641,258       1,117,484        1,275,538        1,642,597        1,887,975
Assets held for sale                                           -          54,628           43,230                -                -
Investment in unconsolidated joint ventures               49,889          24,539           21,610           18,941            8,386
Total assets                                             818,088       1,262,508        1,462,021        1,856,058        1,976,464
Bonds payable                                             22,495          31,975           32,455           32,900           32,900
Notes payable                                            511,443         925,492          997,698        1,227,770        1,184,607
Defeased notes payable                                    74,764               -                -                -                -
Total liabilities and minority interests                 660,716       1,006,068        1,107,533        1,359,371        1,332,730
Shareholders' equity                                     157,372         256,440          354,488          496,687          643,734
Other Data:
Total outlet center GLA (4)                               10,269          12,670           13,497           14,699           14,348
Total outlet centers (4)                                      38              45               48               51               50
====================================================================================================================================
</TABLE>

<PAGE>
                                  Page - (12)

Notes:
(1)  Effective  January 1, 2002, we adopted FAS No. 144. In accordance  with the
     requirements  of FAS No. 144, we have  classified  the  operating  results,
     including gains and losses related to disposition,  for certain  properties
     either  disposed  of or  classified  as assets held for sale during 2002 as
     discontinued  operations in the  statements  of operations  for all periods
     presented.

(2)  Industry  analysts  generally  consider funds from operations  ("FFO"),  as
     defined  by the  National  Association  of Real  Estate  Investment  Trusts
     ("NAREIT"),  an alternative  non-"GAAP" measure of performance of an equity
     REIT. In 1991,  NAREIT adopted its  definition of FFO. This  definition was
     clarified in 1995, 1999 and 2002. FFO is currently defined by NAREIT as net
     income or loss (computed in accordance with accounting principles generally
     accepted  in the United  States  "GAAP"),  excluding  gains or losses  from
     provisions  for  asset  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  partnerships  and joint ventures and
     discontinued  operations.  FFO includes  non-recurring  events,  except for
     those that are defined as  "extraordinary  items" in accordance  with GAAP.
     FFO excludes  the  earnings  impact of  "cumulative  effects of  accounting
     changes"  as defined by GAAP.  Effective  January 1, 2002,  FFO  related to
     assets held for sale, sold or otherwise transferred and included in results
     of discontinued  operations (in accordance with the requirements of FAS No.
     144) should continue to be included in FFO.

     We believe that FFO is an important and widely used non-GAAP 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 our performance.  Our 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 we do.
     Therefore,  we caution that the  calculation of FFO may vary from entity to
     entity and, as such the  presentation of FFO by us may not be comparable to
     other similarly  titled measures of other reporting  companies.  We believe
     that to  facilitate a clear  understanding  of our 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 our  performance  or to cash  flows as a
     measure of liquidity or ability to make distributions.  A reconciliation of
     income (loss) from  continuing  operations  before  allocations to minority
     interests and preferred shareholders to FFO is as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                        2002            2001            2000            1999           1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>              <C>            <C>              <C>             <C>
Income (loss) from continuing operations
  before minority interests                               $ (101,010)      $ (99,945)     $ (147,843)      $ (24,791)      $ 12,970
Adjustments:
  Loss (gain) on sale of real estate                          (5,802)          1,063          42,648          15,153         15,461
  Provision for asset impairment - operating properties       84,093          63,026          68,663           2,270              -
  Depreciation and amortization                               34,301          45,863          57,930          63,470         45,380
  Non-real estate depreciation and amortization               (2,166)         (2,251)         (1,703)           (587)          (432)
  Unconsolidated joint venutres' adjustments                   3,957           3,074           3,269           1,639          1,211
  Non-cash joint venture interest subsidy                          -           1,882               -               -              -
  Discontinued operations                                      1,942           1,489           4,653          (6,812)         7,016
  Discontinued operations - net gain on disposition          (26,152)              -               -               -              -
  Discontinued operations - provision for impairment          27,757               -               -          13,572              -
  Discontinued operations - depreciation and amortization      5,437          11,055           9,626          10,170          7,347
                                                          ----------       ---------      ----------       ---------       --------
FFO before adjustments for non-recurring losses               22,357          25,256          37,243          74,084         88,953
  Non-recurring loss on early extinguishment of debt(1)          525               -           4,206           3,518              -
  Loss on eOutlets(2)                                              -               -          14,703               -              -
  Loss on Designer Connection(3)                                   -               -           1,815           6,561          1,067
                                                          ----------       ---------      ----------       ---------       --------
FFO before allocations to minority interests
  and preferred shareholders                              $   22,882       $  25,256      $   57,967       $  84,163       $ 90,020
                                                          ==========       =========      ==========       =========       ========
====================================================================================================================================
</TABLE>

     Notes:
(1)  Represents  non-recurring  charges  incurred in  connection  with the early
     extinguishment of debt. We adopted FAS No. 145 effective  December 31, 2002
     and accordingly,  classified such costs as a component of interest expense.
     The costs are  attributable to financing  activities  ancillary to our core
     real estate operations.
(2)  Represents  the results of business  activities  ancillary to our core real
     estate operations. Due to financial constraints,  we decided to discontinue
     the Designer  Connection and  eOutlets.com  businesses in December 1999 and
     April 2000,  respectively.  See Note 12 - "Special Charges" of the Notes to
     Consolidated Financial Statements for additional information.

(3)  Includes  special cash  distribution  during 1998 of $0.50 per common share
     relating to our merger with Horizon Group, Inc. completed in June 1998.
(4)  Includes outlet centers we operate under unconsolidated joint ventures with
     unrelated third parties as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
December 31,                                                    2002            2001            2000            1999           1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>             <C>             <C>             <C>              <C>
Aggregate GLA                                                  2,789           1,195           1,764           1,494            595
Number of outlet centers                                           9               3               5               4              3
====================================================================================================================================
</TABLE>

<PAGE>
                                  Page - (13)

                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)

     The  following  discussion  in  "Management's  Discussion  and  Analysis of
Financial  Condition and Results of Operations"  and other sections of this Form
10-K  contain  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.  In
addition,  we may make  forward-looking  statements  in future  filings with the
Securities and Exchange  Commission and in written material,  press releases and
oral  statements  issued  by us or on  our  behalf.  Forward-looking  statements
include statements  regarding the intent,  belief, or current expectations of us
or our officers,  including  statements  preceded by,  followed by, or including
forward-looking terminology such as "may," "will," "should," believe," "expect,"
"anticipate,"  "estimate,"  "continue,"  "predict," or similar  expressions with
respect to various matters.

     These  statements  are subject to potential  risks and  uncertainties  and,
therefore, actual results may differ materially. Such forward-looking statements
are subject to certain risks and uncertainties,  including,  but not limited to,
the risk associated with our high level of leverage and our ability to refinance
such  indebtedness  as it  becomes  due;  the risk that we or one or more of our
subsidiaries are not able to satisfy scheduled debt service  obligations or will
not remain in  compliance  with existing  loan  covenants;  the risk of material
adverse affects of future events,  including tenant  bankruptcies,  abandonments
and the non-payment by tenants of contractual rents and additional rents, on our
financial  performance;  the risk  related to the retail  industry  in which our
outlet  centers  compete,  including  the potential  adverse  impact of external
factors, such as inflation, consumer confidence, unemployment rates and consumer
tastes and preferences;  the risk associated with our potential asset sales; the
risk of potential  increases in market interest rates from current  levels;  the
risk associated with real estate ownership, such as the potential adverse impact
of  changes  in local  economic  climate  on the  revenues  and the value of our
properties;  the risk associated with  litigation;  and the risk associated with
competition from web-based and catalogue retailers.

     All  forward-looking  statements  in this  report are based on  information
available  to us on the date of this report.  We do not  undertake to update any
forward-looking  statements  that  may be  made by us or on our  behalf  in this
report or otherwise.

Introduction

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

Critical Accounting Policies and Estimates

     Our  discussion  and  analysis of our  financial  condition  and results of
operations  are  based  upon our  Consolidated  Financial  Statements  and Notes
thereto  appearing   elsewhere  in  this  Annual  Report  on  Form  10-K.  These
Consolidated  Financial  Statements  and Notes  thereto  have been  prepared  in
accordance with accounting  principles  generally accepted in the United States.
The  preparation of such  statements  requires us to make certain  estimates and
judgments that affect the reported amounts of assets, liabilities,  revenues and
expenses, and the related disclosure of contingent liabilities.  We evaluate our
estimates  on  an  on-going  basis;  including  those  related  to  (i)  revenue
recognition,  (ii)  provisions  for  bad  debt  on  accounts  receivable,  (iii)
potential  impairment of the carrying value of rental  properties  held for use,
(iv) capitalization and depreciation of significant renovations and improvements
and (v) contingencies for debt guarantees and litigation.  We base our estimates
on  historical  trends  and  certain  other  assumptions  that  we  believe  are
reasonable under the particular  circumstances.  These estimates ultimately form
the basis for  making  judgments  about the  carrying  values of our  assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.

     To assist you in  understanding  our  financial  condition and results from
operations,  we have identified our critical  accounting  policies and discussed
them below. These accounting policies are most important to the portrayal of our
financial  condition  and  results  from  operations,   either  because  of  the
significance  of the financial  statement  items to which they relate or because
they require our management's most difficult, subjective or complex judgments.

<PAGE>
                                  Page - (14)

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,  net 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.

Bad Debt Expense

     We regularly  review our accounts  receivable  to determine an  appropriate
amount for the allowance for doubtful accounts based upon the impact of economic
conditions on ours tenants' ability to pay, past collection  experience and such
other factors which, in our judgment,  deserve current  recognition.  In turn, a
provision for uncollectible  accounts receivable ("bad debt expense") is charged
against the allowance to maintain the allowance  level within this range. If the
financial condition of our tenants were to deteriorate,  resulting in impairment
in their ability to make payments due under their leases,  additional allowances
may be required.

Impairment of Rental Property

     We monitor our  Properties  for  indicators  of  impairment  on an on-going
basis.  We record a provision for impairment  when we believe certain events and
circumstances  have  occurred  which  indicate  that the  carrying  value of our
Properties  might  have  experienced  a  decline  in value  that is  other  than
temporary  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 the carrying  value and the estimated  fair
value for assets held in the portfolio.  For assets held for sale, impairment is
measured as the  difference  between  the  carrying  value and fair value,  less
estimated  costs  to  dispose.  Fair  value is based  on  estimated  cash  flows
discounted  at a  risk-adjusted  rate  of  return.  Adverse  changes  in  market
conditions or deterioration  in the operating  results of our outlet centers and
other  rental  properties  could result in losses or an inability to recover the
current carrying value of such assets. Such potential losses or the inability to
recover the  current  carrying  value may not be  reflected  in our  Properties'
current carrying value,  thereby possibly  requiring an impairment charge in the
future.

Capitalization and Depreciation of Significant Renovations and Improvements

     Depreciation  is calculated on the  straight-line  basis over the estimated
useful  lives of the  assets,  based upon  management's  estimates.  Significant
renovations  and  improvements,  which improve  and/or extend the useful life of
assets are capitalized and depreciated over their estimated useful lives,  based
upon management's estimates.

Contingencies

     We are  subject  to  proceedings,  lawsuits,  and other  claims  related to
various  matters  (see  Note  13 -  "Legal  Proceedings"  of  the  Notes  to the
Consolidated Financial Statements for additional information).  Additionally, we
have guaranteed certain indebtedness of others (see Note 6 - "Debt" of the Notes
to Consolidated Financial Statements for additional  information).  With respect
to these  contingencies,  we assess the  likelihood of any adverse  judgments or
outcomes to these  matters  and, if  appropriate,  potential  ranges of probable
losses.  A determination of the amount of reserves  required,  if any, for these
contingencies are made after careful analysis of each individual  issue.  Future
reserves  may be  required  because  of (i) new  developments  or changes to the
approach in which we deal with each matter or (ii) if unasserted claims arise.

Outlet Center Portfolio

Portfolio GLA and Occupancy

     Our outlet center  portfolio size reflects (i) our past  development  (both
new outlet centers and expansions to outlet centers) and acquisition  activities
and (ii) our more recent disposition activities.  Our outlet portfolio consisted
of 38 properties  totaling 10,269,000 square feet of gross leasable area ("GLA")
at December 31, 2002 compared to 45 properties  totaling  12,670,000 square feet
of GLA at December 31, 2001 and 48 properties totaling 13,497,000 square feet of
GLA at December  31, 2000.  The changes in our outlet  center GLA are because of
certain  property  dispositions  during  2002,  2001 and 2000.  Such changes are
discussed below. Our outlet center portfolio was 90.5%, 91.2% and 92.7% occupied
as of December  31,  2002,  2001 and 2000,  respectively.  The  weighted-average
occupancy  of our outlet  center  portfolio  (excluding  properties  disposed of
during 2002 whose results are included in  discontinued  operations)  during the
years  ended  December  31,  2002,  2001 and 2000 was  88.0%,  90.9% and  92.3%,
respectively.

     We  have  disposed  of  certain  properties  through  various  transactions
(including  sale,  joint  venture  arrangements,  foreclosure  and  transfer  of
ownership to the  applicable  lender)  during the years ended December 31, 2002,
2001 and 2000 (see Note 3 - "Property Dispositions" of the Notes to Consolidated
Financial Statements for additional information).  These transactions have had a
significant  impact on the size of our portfolio  for the periods  presented and
are summarized below.

<PAGE>
                                  Page - (15)

     During 2002, we completed  transactions involving 17 properties aggregating
4,431,000 square feet of GLA. These transactions  included (i) the sale of seven
outlet  centers  aggregating  1,791,000  square  feet of GLA into joint  venture
arrangements,  (ii) the sale of five (including one consisting of 197,000 square
feet of GLA that we owned 51% through an  unconsolidated  joint venture)  outlet
centers  aggregating  1,486,000  square feet of GLA to unrelated  third parties,
(iii) the foreclosure  sale and/or transfer of three outlet centers  aggregating
922,000  square  feet of GLA to the  applicable  lender and (iv) the sale of two
community  centers  aggregating  232,000  square feet of GLA to unrelated  third
parties.

     The seven  centers sold into joint  venture  arrangements  consisted of two
separate transactions involving (i) Prime Outlets at Hagerstown (the "Hagerstown
Center"),  which  was  sold  to  an  existing  joint  venture  partnership  (the
"Prime/Estein Venture"),  and (ii) six outlet centers (collectively,  the Bridge
Properties").  Such properties are  collectively  referred to as the "2002 Joint
Venture Properties".  Commencing on the date of disposition,  we account for our
ownership  interest in the 2002 Joint Venture  Properties in accordance with the
equity method of  accounting.  The  operating  results of the 2002 Joint Venture
Properties  are  reflected in our results  from  continuing  operations  for all
periods presented through their respective dates of disposition. Their operating
results have not been  classified to discontinued  operations  because we have a
significant  continuing involvement in these properties.  Additionally,  we sold
Phases II and III of the Bellport Outlet Center.  We accounted for our ownership
interest in the Bellport  Outlet Center in accordance  with the equity method of
accounting through its date of disposition.

     The  operating  results  of the  remaining  disposed  properties  have been
classified  as  discontinued   operations  in  the   accompanying   Consolidated
Statements of Operations for all periods presented.

     During  2001,  we  completed   transactions   involving  three   properties
aggregating 723,000 square feet of GLA. These transactions included (i) the sale
of one outlet center  consisting  of 257,000  square feet of GLA to an unrelated
third party,  (ii) the foreclosure  sale of one outlet center (that we owned 50%
through an  unconsolidated  joint venture)  consisting of 326,000 square feet of
GLA and (iii) the sale of one community center consisting of 140,000 square feet
of GLA to an  unrelated  third  party.  The  operating  results  for  properties
disposed of during 2001 are not  classified  as  discontinued  operations in the
accompanying   Consolidated  Statements  of  Operations.   Such  properties  are
collectively referred to as the "2001 Property Dispositions".

     During  2000,  we  completed   transactions   involving   five   properties
aggregating  1,866,000 square feet of GLA. These  transactions  included (i) the
sale of one  outlet  center  consisting  of  274,000  square  feet of GLA to the
Prime/Estein  Venture  and  (ii)  the sale of four  outlet  centers  aggregating
1,592,000 square feet of GLA to unrelated third parties.  The operating  results
for  properties  disposed  of during  2000 are not  classified  as  discontinued
operations  in the  accompanying  Consolidated  Statements of  Operations.  Such
properties are collectively referred to as the "2000 Property Dispositions".

     Effective  January 1, 2002,  we adopted  Statement of Financial  Accounting
Standards  ("FAS")  No.  144,  "Accounting  for the  Impairment  or  Disposal of
Long-Lived  Assets." In accordance with the requirements of FAS No. 144, we have
classified  the  operating  results,  including  gains  and  losses  related  to
disposition,  for certain  properties either disposed of or classified as assets
held  for  sale  during  2002 as  discontinued  operations  in the  accompanying
Consolidated  Statements of Operations for all periods presented.  The operating
results for  properties  that were sold into joint venture  partnerships  during
2002 have not been  classified to  discontinued  operations in the  accompanying
Consolidated  Statements  of  Operations  because we still retain a  significant
continuing  involvement  in  their  operations.  Such  properties  and/or  their
operating  results  through  the  dates  of  their  respective  disposition  are
collectively  referred to as the "2002 Joint Venture Properties".  The operating
results for properties  disposed of before January 1, 2002 are not classified as
discontinued operations.  Such properties and/or their operating results through
the dates of their respective  disposition are  collectively  referred to as the
"2001  Property  Dispositions"  or "2000 Property  Dispositions".  The following
discussion and tables regarding operating results for the comparable periods are
reflective of the  classification  requirements  under FAS No. 144 and relate to
operating results from continuing operations unless otherwise indicated.

<PAGE>
                                  Page - (16)

Results of Operations

Table 1 - Consolidated Statements of Operations

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                              2002 vs. 2001                       2001 vs. 2000
                                                                       --------------------------           ----------------------
                                                                                                %                                 %
Years Ended December 31,                               2002         2001       Change      Change       2000      Change     Change
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>         <C>          <C>           <C>      <C>          <C>          <C>
Revenues
Base rents                                          $  86,184   $ 113,546    $(27,362)    -24.1%    $ 151,605    $(38,059)   -25.1%
Percentage rents                                        3,756       3,469         287       8.3%        5,566      (2,097)   -37.7%
Tenant reimbursements                                  48,730      54,178      (5,448)    -10.1%       70,749     (16,571)   -23.4%
Interest and other                                     13,361      12,126       1,235      10.2%       13,728      (1,602)   -11.7%
                                                    ---------   ---------    --------     -----     ---------    --------    ------
  Total revenues                                      152,031     183,319     (31,288)    -17.1%      241,648     (58,329)   -24.1%

Expenses
Property operating                                     42,446      44,472      (2,026)     -4.6%       58,494     (14,022)   -24.0%
Real estate taxes                                      12,931      15,054      (2,123)    -14.1%       17,655      (2,601)   -14.7%
Depreciation and amortization                          34,301      45,863     (11,562)    -25.2%       57,930     (12,067)   -20.8%
Corporate general and administrative                   14,562      14,290         272       1.9%       21,581      (7,291)   -33.8%
Interest                                               61,826      79,864     (18,038)    -22.6%       91,161     (11,297)   -12.4%
Other charges                                           8,684      19,632     (10,948)    -55.8%       22,907      (3,275)   -14.3%
Provision for asset impairment                         84,093      63,026      21,067        n/m       77,115     (14,089)      n/m
                                                    ---------   ---------    --------     -----     ---------    --------    ------
  Total expenses                                      258,843     282,201     (23,358)     -8.3%      346,843     (64,642)   -18.6%
                                                    ---------   ---------    --------     -----     ---------    --------    ------
Loss before gain (loss) on sale of real
  estate and minority interests                      (106,812)    (98,882)     (7,930)      8.0%     (105,195)      6,313     -6.0%
Gain (loss) on sale of real estate, net                 5,802      (1,063)      6,865        n/m      (42,648)     41,585       n/m
                                                    ---------   ---------    --------     -----     ---------    --------    ------
Loss from continuing operations
  before minority interests                          (101,010)    (99,945)     (1,065)      1.1%     (147,843)     47,898    -32.4%
Loss allocated to minority interests                        -         408        (408)       n/m          738        (330)      n/m
                                                    ---------   ---------    --------     -----     ---------    --------    ------
Loss from continuing operations                      (101,010)    (99,537)     (1,473)      1.5%     (147,105)     47,568    -32.3%
Discontinued operations, including provision for
  asset impairment of $27,757 and net gain of
  $26,152 on dispositions in 2002                       1,942       1,489         453        n/m        4,653      (3,164)      n/m
                                                    ---------   ---------    --------     -----     ---------    --------    ------
Net loss                                              (99,068)    (98,048)     (1,020)      1.0%     (142,452)     44,404    -31.2%
Allocations to preferred shareholders                 (22,672)    (22,672)          -       0.0%      (22,672)          -      0.0%
                                                    ---------   ---------    --------     -----     ---------    --------    ------
Net loss applicable to common shares                $(121,740)  $(120,720)   $ (1,020)      0.8%    $(165,124)   $ 44,404    -26.9%
                                                    =========   =========    ========     =====     =========    ========    ======

Basic and diluted earnings per common share:
Loss from continuing operations                     $   (2.83)  $   (2.80)                          $   (3.90)
Discontinued operations                                  0.04        0.03                                0.11
                                                    ---------   ---------                           ---------
  Net loss                                          $   (2.79)  $   (2.77)                          $   (3.79)
                                                    =========   =========                           =========

Weighted-average common shares
  outstanding - basic and diluted                      43,578      43,578                              43,517
                                                    =========   =========                           =========
====================================================================================================================================
</TABLE>

<PAGE>
                                  Page - (17)

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, 2002,
2001  and  2000 is  presented  in the  following  table,  expressed  in  amounts
calculated on a weighted-average occupied GLA basis.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                               2002               2001               2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                <C>                <C>
GLA at end of period (1)                                                              7,458             11,864             12,322
Portfolio weighted-average occupied GLA (1)                                           7,216              8,606             10,360
Outlet center weighted-average occupied GLA (1)                                       7,070              8,453             10,051
Number of outlet centers at end of period (2)                                            38                 45                 48
New outlet centers opened (2)                                                             -                  -                  1
Outlet centers expanded (2)                                                               -                  -                  2
Community centers at end of period                                                        -                  2                  3
Number of states and territories at end of period                                        24                 26                 26

Portfolio Weighted-Average per Square Foot (3):
Revenues
Rental revenues (4)                                                                 $ 19.21            $ 19.89            $ 22.00
Interest and other                                                                     1.85               1.41               1.09
                                                                                    -------            -------            -------
  Total revenues                                                                      21.06              21.30              23.09

Expenses (5)
Recoverable expenses                                                                   7.67               6.92               7.35
Depreciation and amortization                                                          4.75               5.33               5.59
Corporate general and administrative                                                   2.02               1.66               1.64
Interest                                                                               8.50               9.28               8.39
Other charges                                                                          0.79               1.71               1.40
                                                                                    -------            -------            -------
  Total expenses                                                                      23.73              24.90              24.37
                                                                                    -------            -------            -------
Loss                                                                                $ (2.67)           $ (3.60)           $ (1.28)
                                                                                    =======            =======            =======

Outlet Center Weighted-Average per Square Foot (3):
Revenues
Rental revenues                                                                     $ 19.33            $ 20.02            $ 22.39
Interest and other                                                                     0.89               0.97               0.68
                                                                                    -------            -------            -------
  Total revenues                                                                      20.22              20.99              23.07

Expenses (5)
Recoverable expenses (6)                                                               7.68               6.97               7.42
Depreciation and amortization                                                          4.54               5.16               5.57
Interest                                                                               7.40               7.42               7.52
Other charges                                                                          0.75               1.56               0.81
                                                                                    -------            -------            -------
  Total expenses                                                                      20.37              21.11              21.32
                                                                                    -------            -------            -------
Income (loss)                                                                       $ (0.15)           $ (0.12)           $  1.75
                                                                                    =======            =======            =======
====================================================================================================================================
</TABLE>

Notes:
(1)  Includes  total GLA in which we receive  substantially  all of the economic
     benefit.  Does  not  include  GLA in which  we have an  ownership  interest
     through  unconsolidated  joint  ventures.  The  portfolio  weighted-average
     occupied GLA and the factory outlet  weighted-average  occupied GLA amounts
     only include  those  properties  whose  operating  results are reflected in
     continuing  operations  for all periods  presented  (See Note 3 - "Property
     Dispositions"  of  the  Notes  to  Consolidated  Financial  Statements  for
     additional.)
(2)  Includes outlet centers operated under unconsolidated joint ventures.
(3)  Based on  occupied  GLA  weighted  by months of  operation  for  properties
     included in continuing  operations.  The occupied GLA on a weighted-average
     basis for the 2002 Joint Venture Properties, the 2001 Property Dispositions
     and the 2000 Property Dispositions are included in the weighted-average GLA
     through the dates of their respective dispositions. (See Note 3 - "Property
     Dispositions"  of  the  Notes  to  Consolidated  Financial  Statements  for
     additional information.
(4)  Rental revenues is comprised of base rent, percentage rents and
     tenant reimbursable income.
(5)  Excludes the following non-recurring items:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                                2002               2001               2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                <C>                <C>
Gain on sale of outparcel land (excluded from interest income)                        $     -            $     -            $ 2,472
Provision for asset impairment                                                         84,093             63,026             77,115
Loss on early extinguishment of debt (excluded from interest expense)                     525                  -              4,206
Corporate general and administrative(i)                                                     -                  -              4,610
Other charges(ii)                                                                       3,000              4,918              6,617
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Notes:
(i.) Excludes  non-recurring  costs  incurred  during  2000  aggregating  $4,610
     consisting of (i) severance and other  compensation  costs of $2,421,  (ii)
     professional  fees of $1,455  relating to refinancing  activities and (iii)
     $734 of general and administrative costs related to eOutlets.com.
(ii.)Excludes  non-recurring other charges aggregating $3,000, $4,918 and $6,617
     in 2002,  2001 and 2000,  respectively.  The 2002  non-recurring  charge of
     $3,000  related to pending and  potential  tenant  claims  with  respect to
     certain lease provisions.  The 2001 non-recurring other charges aggregating
     $4,918  includes  (i) a charge of $2,000  related to pending and  potential
     tenant  claims with  respect to certain  lease  provisions,  (ii) a loss of
     $1,882  related to an interest  rate subsidy  agreement and (iii) a loss of
     $1,036 related to the  refinancing of first mortgage loans on Prime Outlets
     at Birch Run. The 2000  non-recurring  costs aggregating $6.617 include (i)
     $5,517 of costs related to  eOutlets.com,  (ii) a loss on operations of our
     Designer  Connection  outlet  stores  of $1,815  and (iii)  $1,100 of costs
     related to the termination of a sale agreement.
(6)  Recoverable  expenses is comprised of property  operating expenses and real
     estate taxes.

<PAGE>
                                  Page - (18)

Comparison  of  the  Year Ended December 31, 2002 to the Year Ended December 31,
2001

Summary

     We reported losses from  continuing  operations of $101,010 and $99,537 for
the years ended  December  31, 2002 and 2001,  respectively.  For the year ended
December  31,  2002,  the net loss  applicable  to our common  shareholders  was
$121,740,  or $2.79 per common share.  For the year ended December 31, 2001, the
net loss applicable to our common shareholders was $120,720, or $2.77 per common
share.

     During  the  year  ended  December  31,  2002,  we  reported  a  loss  from
discontinued  operations of $1,942,  or $0.04 per common  share.  This loss from
discontinued  operations  includes  (i) a net gain  related to  dispositions  of
$26,152 and (ii) a provision for asset  impairment  of $27,557.  During the year
ended  December  31,  2001,  we reported a gain on  discontinued  operations  of
$1,489, or $0.03 per common share.

     The 2002  results  from  continuing  operations  include  (i) an  aggregate
provision for asset impairment of $84,093, or $1.93 per common share, (ii) a net
gain on the sale of real estate of $5,802,  or $1.33 per common  share,  (iii) a
second quarter  non-recurring  charge (included in other charges) of $3,000,  or
$0.07 per common  share,  related to pending and  potential  tenant  claims with
respect to certain lease provisions and (iv) a fourth quarter non-recurring loss
(included in interest  expense) of $525, or $0.01 per common  share,  related to
the early extinguishment of debt.

     The 2001 results from  continuing  operations  include (i) a provision  for
asset  impairment of $63,026,  or $1.45 per common share,  (ii) a fourth quarter
non-recurring  charge (included in other charges) of $2,000, or $0.05 per common
share,  related to pending and  potential  tenant claims with respect to certain
lease provisions,  (iii) a third quarter  non-recurring  loss (included in other
charges)  of $1,882,  or $0.04 per common  share,  related to an  interest  rate
subsidy  agreement,  (iv) a third quarter  non-recurring loss (included in other
charges) of $1,036,  or $0.02 per common share,  related to the  refinancing  of
first  mortgage loans on Prime Outlets at Birch Run (the "Birch Run Center") and
(v) a net loss on the sale of real estate of $1,036, or $0.02 per common share.

Revenues

     Total  revenues were $152,031 for the year ended December 31, 2002 compared
to $183,319 for the year ended  December  31,  2001,  a decrease of $31,288,  or
17.1%.  Base rents decreased  $27,362,  or 24.1%, to $86,184 in 2002 compared to
$113,546  in  2001.  These  decreases  are  primarily  due to  (i)  transactions
involving   the  2002  Joint   Venture   Properties,   (ii)  the  2001  Property
Dispositions,  (iii) changes in economic  rental rates and (iv) the reduction in
outlet  center  occupancy  during the 2002 period.  Straight-line  rent expense,
included  in base rent was $497 and $439 for the years ended  December  31, 2002
and 2001, respectively.

     Percentage  rents,  which  represent  rents based on a percentage  of sales
volume above a specified  threshold,  increased  $287, or 8.3%, to $3,756 during
the year ended December 31, 2002 compared to $3,469 for the same period in 2001.
This increase was primarily attributable to changes in economic rental rates.

     As summarized in TABLE 3, merchant sales reported for centers  remaining in
our outlet center portfolio at period-end were $2,047 million and $2,474 million
for  the  years   ended   December   31,  2002  and  2001,   respectively.   The
weighted-average  reported  merchant sales per square foot increased to $245 per
square foot in 2002 from $241 per square foot in 2001. Total merchant  occupancy
cost per square  foot  increased  to $20.75 in 2002 from $20.68 in 2001 and as a
percentage  of  reported  sales  decreased  from 8.65% in 2001 to 8.43% in 2002.
Total  merchant  occupancy  costs,  excluding  marketing  contributions,   as  a
percentage of reported sales decreased to 7.85% in 2002 from 7.99% in 2001.

<PAGE>
                                  Page - (19)

Table 3 - Summary of Reported Merchant Sales

     A summary of reported outlet merchant sales and related data for 2002, 2001
and 2000 follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                               2002               2001                2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>                <C>                 <C>
Total reported merchant sales (in millions) (1)                                     $ 2,047            $ 2,474             $ 2,746
Weighted-average reported merchant sales per square foot (2)
  All stores sales                                                                  $   245            $   241             $   245
  Change in same store sales versus prior year                                         -3.6%
Total merchant occcupancy costs per square foot (3)                                 $ 20.75            $ 20.68             $ 22.03
Total merchant occcupancy costs, excluding marketing
  contributions, per square foot (3)
Merchant occupancy costs as a percentage of reported sales (4)                         8.47%              8.65%               8.99%
Merchant occupancy costs, excluding marketing contributions,
  as a percentage of reported sales (5)                                                7.85%              7.99%               8.26%
====================================================================================================================================
</TABLE>
Notes:
(1)  Total reported merchant sales summarizes gross sales generated
     by merchants and includes changes in merchant mix.
(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-store sales is defined as the weighted-average
     reported merchant sales per square foot for stores open since the beginning
     of the prior year.
(3)  Total  merchant  occupancy  cost per  square  foot  consists  of base rent,
     percentage  rent and tenant  reimbursement  income  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 $5,448, or 10.1%, to $48,730
in 2002  compared  to $54,178 in 2001.  This  decline  is  primarily  due to (i)
transactions involving the 2002 Joint Venture Properties, (ii) the 2001 Property
Dispositions,  (iii) changes in economic rental rates and (iv) reduced aggregate
outlet center weighted-average occupancy during the 2002.

     As shown in TABLE 4, tenant  reimbursements  as a percentage of recoverable
property  operating expenses and real estate taxes was 88.0% in 2002 compared to
91.0%  in  2001.  The  decline  in  tenant  reimbursements  as a  percentage  of
recoverable  property  operating  expenses and real estate  taxes was  primarily
attributable  to  the  aforementioned  changes  in  economic  rental  rates  and
weighted-average occupancy.

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

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                    2002                2001                2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                 <C>                 <C>
Tenant reimbursements                                     $ 48,730            $ 54,178            $ 70,749

Recoverable Expenses:
Property operating                                        $ 42,446            $ 44,472            $ 58,494
Real estate taxes                                           12,931              15,054              17,655
                                                          --------            --------            --------
  Total recoverable expenses                              $ 55,377            $ 59,526            $ 76,149
                                                          ========            ========            ========

Tenant reimbursements as a percentage
  of total recoverable expenses                               88.0%               91.0%               92.9%
                                                          ========            ========            ========
====================================================================================================================================
</TABLE>

     Interest and other income increased by $1,235,  or 10.2%, to $13,361 during
the year ended December 31, 2002 compared to $12,126 for the year ended December
31, 2001. The increase was primarily  attributable to (i) higher equity earnings
in  unconsolidated  joint  ventures of $2,560,  (ii) increased  other  ancillary
income of $577 and (iii)  higher  property  management  and  leasing  commission
income  of  $351.  These  items  were  partially  offset  by (i)  reduced  lease
termination income of $1,159 and (ii) decreased  municipal  assistance income of
$1,094.

Expenses

     Property  operating  expenses  decreased by $2,026,  or 4.6%, to $42,466 in
2002 compared to $44,472 in 2001. Real estate taxes expense decreased by $2,123,
or 14.1%, to $12,931 in 2002 from $15,054 in 2001. These decreases are primarily
because of the transactions  involving the 2002 Joint Venture Properties and the
2001 Property Dispositions.

     As shown in TABLE 5,  depreciation  and amortization  expense  decreased by
$11,562, or 25.2%, to $34,301 in 2002 compared to $45,863 in 2001. This decrease
was  primarily  attributable  to the  depreciation  and  amortization  of assets
associated with the transactions involving the 2002 Joint Venture Properties and
the 2001 Property Dispositions.

<PAGE>
                                  Page - (20)

Table 5 - Components of Depreciation and Amortization Expense

     The components of depreciation and amortization  expense for 2002, 2001 and
2000 are summarized as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                  2002                    2001                    2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                     <C>                     <C>
Building and improvements                                             $ 16,899                $ 22,761                $ 31,171
Land improvements                                                        4,080                   4,866                   5,250
Tenant improvements                                                     10,641                  15,106                  18,524
Furniture and fixtures                                                   2,467                   2,733                   2,372
Leasing commissions                                                        214                     397                     613
                                                                      --------                --------                --------
  Total                                                               $ 34,301                $ 45,863                $ 57,930
                                                                      ========                ========                ========
====================================================================================================================================
</TABLE>

     As shown in TABLE 6, interest  expense  decreased by $17,953,  or 22.5%, to
$61,911 in 2002 compared to $79,864 in 2001.  This  decrease  reflects (i) lower
interest  incurred  of  $16,877,  (ii) a decrease  in  amortization  of deferred
financing costs of $1,509 and (iii) higher amortization of debt premiums of $92.
Partially offsetting these items was a non-recurring loss of $525 related to the
write-off of unamortized deferred financing costs because of the early repayment
of a mezzanine loan (the "Mezzanine  Loan") in December 2002. The Mezzanine Loan
was scheduled to mature in September 2003.

     The  decrease  in  interest  incurred is  primarily  attributable  to (i) a
reduction of $159,064 in our weighted-average  debt outstanding,  excluding debt
premiums, during the year ended December 31, 2002 compared to the same period in
2001 and (ii) a decrease in the  weighted-average  contractual  interest rate on
our debt for the year ended  December  31,  2002  compared to the same period in
2001.  The  decrease  in   weighted-average   debt   outstanding  was  primarily
attributable to asset dispositions.  The  weighted-average  contractual interest
rates for 2002 and 2001 were 8.95% and 9.27%, respectively.

Table 6 - Components of Interest Expense

     The components of interest  expense for 2002,  2001 and 2000 are summarized
as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                            2002                 2001                2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                  <C>                 <C>
Interest incurred                                                                 $ 58,574             $ 75,451            $ 89,286
Amortization of deferred financing costs                                             4,747                6,341               2,922
Non-recurring loss on early extinguishment of debt                                     525                    -               4,206
Amortization of debt premiums                                                       (2,020)              (1,928)             (1,841)
Interest capitalized to development projects                                             -                    -              (3,412)
                                                                                  --------             --------            --------
  Total                                                                           $ 61,826             $ 79,864            $ 91,161
                                                                                  ========             ========            ========
====================================================================================================================================
</TABLE>

     Other charges were $8,684 and $19,632 for the years ended December 31, 2002
and 2001, respectively,  which includes non-recurring charges aggregating $3,000
and  $4,918  in 2002 and  2001,  respectively.  Excluding  the  effect  of these
non-recurring  items,  which are discussed  below,  other  charges  decreased by
$9,030,  or 61.4%,  to $5,684 for the year ended  December 31, 2002  compared to
$14,714 for the same period in 2001. This decrease was primarily attributable to
(i) lower bad debt expense of $7,150 and (ii) reduced corporate  marketing costs
of  $2,186.  These  items  were  partially  offset by an  increase  in all other
expenses of $306. The decrease in bad debt expense was primarily attributable to
(i)  resolution  of  certain  disputes  with  tenants  and (ii)  reduced  tenant
bankruptcies, abandonments and store closings during the 2002 period.

     During the second  quarter of 2002, we recorded a  non-recurring  charge in
the amount of $3,000 to  establish a reserve for  pending and  potential  tenant
claims with respect to lease provisions  related to their  pass-through  charges
and promotional fund charges. We had previously recorded a non-recurring  charge
in the amount of $2,000 to  establish a reserve for similar  matters  during the
fourth  quarter of 2001.  To date,  we have entered into  settlement  agreements
providing  for  payments  aggregating  $2,760,  of which  $2,607  was paid as of
December  31,  2002.  The  remaining  reserve of $2,393 is  included in accounts
payable and other liabilities in the accompanying  Consolidated Balance Sheet as
of  December  31,  2002.  See  Note 13 -  "Legal  Proceedings"  of the  Notes to
Consolidated Financial Statements for additional information.

     These reserves were estimated in accordance with our  established  policies
and procedures  with respect to loss  contingencies  (see  "Critical  Accounting
Policies and Estimates" for additional  information) and is based on our current
assessment  of the  likelihood  of any  adverse  judgments  or outcomes to these
matters. Based on presently available information, we believe it is probable the
remaining  reserve will be utilized  over the next several  years in  connection
with  the  resolution  of  further  claims  relating  to  the  pass-through  and
promotional fund provisions contained in our leases. We caution,  however,  that
given the inherent  uncertainties of litigation and the complexities  associated
with a large number of leases and other factual questions at issue, actual costs
may vary from our estimate.

     During the third  quarter of 2001,  we recorded a  non-recurring  charge of
$1,882 related to an interest rate subsidy agreement and a non-recurring loss of
$1,036  related  to the  refinancing  of first  mortgage  loans on the Birch Run
Center.

<PAGE>
                                  Page - (21)

     During  the  third  quarter  of  2002,  certain  events  and  circumstances
occurred, including (i) changes to the anticipated holding periods of certain of
our long-lived  assets and (ii) reduced  occupancy and limited leasing  success,
that  indicated  that certain of our  properties  were impaired on an other than
temporary  basis.  As a result,  we  recorded a provision  for asset  impairment
aggregating  $81,619  representing  the write-down of these  properties to their
estimated  fair  values in  accordance  with the  requirements  of FAS No.  144.
Additionally,  during the fourth  quarter of 2002, we recognized a provision for
asset  impairment  of $2,474 to fully  write-off  the carrying  value of certain
costs previously  capitalized in connection with former  development  activities
based on our  current  assessment  as to our ability to recover  their  carrying
value.  During the third  quarter of 2001, we had also  determined  that certain
events and circumstances  had occurred,  including reduced occupancy and limited
leasing success,  that indicated that certain of our properties were impaired on
an other than temporary  basis.  As a result,  we recorded a provision for asset
impairment  aggregating  $63,026,  representing  the  write-down of the carrying
value of these  properties to their estimated fair values in accordance with the
requirements of FAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed of".

Table 7 - Capital Expenditures

     The  components  of  capital  expenditures  for  2002,  2001  and  2000 are
summarized as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                              2002                 2001                2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                 <C>                 <C>
Expansions and renovations                                                         $ 2,353             $  4,404            $ 26,068
Re-leasing tenant allowances                                                         5,360                8,273               8,050
New development                                                                          -                3,336              17,715
                                                                                   -------             --------            --------
  Total                                                                            $ 7,713             $ 12,677            $ 34,118
                                                                                   =======             ========            ========
====================================================================================================================================
</TABLE>

Table 8 - Consolidated Quarterly Summary of Operations (1)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                             2002                                             2001
--------------------------------------------------------------------------------------   -------------------------------------------
                                           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>        <C>
Total revenues (2)                        $36,163    $ 36,246    $ 38,299    $ 41,323    $ 45,143    $ 44,554   $ 46,194   $ 47,428
Total expenses (3)                         40,933     122,268      47,937      47,705      55,985     118,483     53,455     54,278
                                          -------    --------    --------    --------    --------    --------   --------   --------
Loss before gain (loss) on sale of
  real estate and minority interests       (4,770)    (86,022)     (9,638)     (6,382)    (10,842)    (73,929)    (7,261)    (6,850)
Gain (loss) on sale of real estate              -           -     (10,991)     16,793      (1,615)          -       (180)       732
                                          -------    --------    --------    --------    --------    --------   --------   --------
Loss from continuing operations
  before minority interests                (4,770)    (86,022)    (20,629)     10,411     (12,457)    (73,929)    (7,441)    (6,118)
Allocations to minority interests               -           -           -           -           7           -        400          1
                                          -------    --------    --------    --------    --------    --------   --------   --------
Loss from continuing operations            (4,770)    (86,022)    (20,629)     10,411     (12,450)    (73,929)    (7,041)    (6,117)
Discontinued operations                    17,712       2,517      (9,557)     (8,730)        127         677        198        487
                                          -------    --------    --------    --------    --------    --------   --------   --------
Net income (loss)                          12,942     (83,505)    (30,186)      1,681     (12,323)    (73,252)    (6,843)    (5,630)
Allocations to preferred shareholders      (5,668)     (5,668)     (5,668)     (5,668)     (5,668)     (5,668)    (5,668)    (5,668)
                                          -------    --------    --------    --------    --------    --------   --------   --------
Net income (loss) applicable
  common shares                             7,274     (89,173)    (35,854)     (3,987)    (17,991)    (78,920)   (12,511)   (11,298)
                                          =======    ========    ========    ========    ========    ========   ========   ========

Basic and diluted earnings per
  common share:
Loss from continuing operations           $ (0.24)   $  (2.11)   $  (0.60)   $   0.11    $  (0.41)   $  (1.83)  $  (0.29)  $  (0.27)
Discontinued operations                      0.41        0.06       (0.22)      (0.20)          -        0.02          -       0.01
                                          -------    --------    --------    --------    --------    --------   --------   --------
  Net income (loss)                       $  0.17    $  (2.05)   $  (0.82)   $  (0.09)   $  (0.41)   $  (1.81)  $  (0.29)  $  (0.26)
                                          =======    ========    ========    ========    ========    ========   ========   ========

Weighted-average common shares
  outstanding - basic and diluted          43,578      43,578      43,578      43,578      43,578      43,578     43,578     43,578
                                          =======    ========    ========    ========    ========    ========   ========   ========
====================================================================================================================================
</TABLE>

Notes:
(1)  Certain  prior  quarterly  financial   information  has  been  reclassified
     pursuant to the requirements of FAS No. 144.
(2)  The first quarter of 2001 total revenues  includes a non-recurring  gain on
     the sale of outparcel land of $2,472.
(3)  The  following  non-recurring  charges  and  costs are  reflected  in total
     expenses for the period indicated:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                            2002                                                                 2001
-----------------------------------------------------------------------------------   ----------------------------------------------
                                      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>
Provision for asset impairment        $2,474      $81,619      $    -         $ -      $    -        $63,026        $ -        $ -
Interest expense(i)                      525            -           -           -           -              -          -          -
Other charges(ii)                          -            -       3,000           -       2,000          2,918          -          -
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

     Notes:
(i.) During the fourth quarter of 2002, we incurred a non-recurring  loss on the
     early  extinguishment  of debt of $525 in connection  with the repayment of
     the Mezzanine Loan.
(ii.)The 2002  non-recurring  second quarter charge of $3,000 related to pending
     and potential tenant claims with respect to certain lease  provisions.  The
     2001  non-recurring  other charges  include (i) a fourth  quarter charge of
     $2,000  related to pending and  potential  tenant  claims  with  respect to
     certain lease provisions and third quarter  non-recurring charges and costs
     aggregating  $2,918  (loss of $1,882  related to an interest  rate  subsidy
     agreement and a loss of $1,036 related to the refinancing of first mortgage
     loans on the Birch Run Center).

<PAGE>
                                  Page - (22)

Comparison  of  the  Year Ended December 31, 2001 to the Year Ended December 31,
2000

Summary

     We reported losses from  continuing  operations of $99,537 and $147,105 for
the years ended  December  31, 2001 and 2000,  respectively.  For the year ended
December  31,  2001,  the net loss  applicable  to our common  shareholders  was
$120,720,  or $2.77 per common share.  For the year ended December 31, 2000, the
net loss applicable to our common shareholders was $165,124, or $3.79 per common
share.

     During the years ended  December  31, 2001 and 2000,  we reported  gains on
discontinued  operations of $1,489,  or $0.03 per common share,  and $4,653,  or
$0.11 per common share, respectively.

     The 2001 results from  continuing  operations  include (i) a provision  for
asset  impairment of $63,026,  or $1.45 per common share,  (ii) a fourth quarter
non-recurring  charge (included in other charges) of $2,000, or $0.05 per common
share,  related to pending and  potential  tenant claims with respect to certain
lease provisions,  (iii) a third quarter  non-recurring  loss (included in other
charges)  of $1,882,  or $0.04 per common  share,  related to an  interest  rate
subsidy  agreement,  (iv) a third quarter  non-recurring loss (included in other
charges) of $1,036,  or $0.02 per common share,  related to the  refinancing  of
first  mortgage  loans on the Birch Run Center and (v) a net loss on the sale of
real estate of $1,036, or $0.02 per common share.

     The 2000 results from  continuing  operations  include (i) a third  quarter
provision for asset impairment of $68,663, or $1.58 per common share, (ii) a net
loss on the sale of real estate of $42,648,  or $0.98 per common share,  (iii) a
loss on eOutlets.com  aggregating  $14,703 ($8,452,  $5,517 and $734 included in
provision  for  asset  impairment,  other  charges  and  corporate  general  and
administrative  expense,   respectively),   or  $0.34  per  common  share,  (iv)
non-recurring  costs  (included  in interest  expense)  of $4,206,  or $0.10 per
common share, related to the prepayment and modification to the terms of certain
indebtedness,  (v) a first quarter gain on the sale of outparcel  land (included
in interest and other income) of $2,472, or $0.06 per common share, (vi ) a loss
on  Designer  Connection  (included  in  other  charges)  of  $1,815  and  (vii)
non-recurring  third quarter  costs  (included in other  charges) of $1,100,  or
$0.03 per common share, related to the termination of a sale agreement.

Revenues

     Total  revenues were $183,319 for the year ended December 31, 2001 compared
to $241,648 for the year ended  December  31,  2000,  a decrease of $58,329,  or
24.1%. Base rents decreased  $38,059,  or 25.1%, to $113,546 in 2001 compared to
$151,605 in 2000.  These  decreases  are  primarily due to (i) the 2001 Property
Dispositions,  (ii) the 2000  Property  Dispositions,  (iii) changes in economic
rental rates and (iv) the reduction in outlet center  occupancy  during the 2001
period.  Straight-line rent expense,  included in base rent was $439 and $51 for
the years ended December 31, 2001 and 2000, respectively.

     Percentage  rents,  which  represent  rents based on a percentage  of sales
volume above a specified threshold, decreased $2,097, or 37.3%, to $3,469 during
the year ended December 31, 2001 compared to $5,566 for the same period in 2000.
This decrease was primarily  attributable to the 2001 Property  Dispositions and
the 2000 Property Dispositions.

     As summarized in TABLE 3, merchant sales reported for centers  remaining in
our outlet center portfolio at period-end were $2,474 million and $2,746 million
for  the  years   ended   December   31,  2001  and  2000,   respectively.   The
weighted-average  reported  merchant sales per square foot decreased to $241 per
square foot in 2001 from $245 per square foot in 2000. Total merchant  occupancy
cost per square  foot  decreased  from $22.03 in 2000 to $20.68 in 2001 and as a
percentage of reported sales from 8.99% to 8.65%, respectively.

     Tenant  reimbursements,  which  represent  the  contractual  recovery  from
tenants of certain  operating  expenses,  decreased  by  $16,571,  or 23.4%,  to
$54,178 in 2001 compared to $70,749 in 2000.  This decline is primarily  because
of (i) the 2001  Property  Dispositions,  (ii) the 2000  Property  Dispositions,
(iii)   changes  in   economic   rental   rates  and  (iv)   reduced   aggregate
weighted-average  outlet  center  occupancy  during  2001.  As shown in TABLE 4,
tenant reimbursements as a percentage of recoverable property operating expenses
and real estate taxes was 91.0% in 2001  compared to 92.9% in 2000.  The decline
in tenant  reimbursements  as a percentage  of  recoverable  property  operating
expenses and real estate taxes was primarily  attributable to the aforementioned
changes in economic rental rates and weighted average occupancy.

     Interest  and other  income was  $12,126  and  $13,728  for the years ended
December 31, 2001 and 2000, respectively, which includes a non-recurring gain on
the sale of  outparcel  land of $2,472  during the 2000  period.  Excluding  the
effect of this non-recurring  item, interest and other income increased by $870,
or 7.7%, to $12,126 for year ended December 31, 2001 compared to $11,256 for the
same period in 2000.  This  increase was  primarily  attributable  to (i) higher
equity  earnings  in  unconsolidated  joint  ventures  of $958,  (ii)  increased
property  management  and  leasing  commission  income  of  $830,  (iii)  higher
municipal assistance income of $401 and (iv) increased other ancillary income of
$380.  Partially  offsetting these items were (i) less  amortization of deferred
income of $782, (ii) lower lease termination  income of $572 and (iii) decreased
temporary tenant income of $345.

<PAGE>
                                  Page - (23)

Expenses

     Property operating  expenses decreased by $14,022,  or 24.0%, to $44,472 in
2001 compared to $58,494 in 2000. Real estate taxes expense decreased by $2,601,
or 14.7%, to $15,054 in 2001 from $17,655 in 2000. These decreases are primarily
because of the (i) the 2001  Property  Dispositions  and (ii) the 2000  Property
Dispositions.

     As shown in TABLE 5,  depreciation  and amortization  expense  decreased by
$12,067, or 20.8%, to $45,863 in 2001 compared to $57,930 in 2000. This decrease
was  primarily  attributable  to the  depreciation  and  amortization  of assets
associated   with  the  2001  Property   Dispositions   and  the  2000  Property
Dispositions.

     As shown in TABLE 6, interest  expense  decreased by $11,297,  or 12.4%, to
$79,864 in 2001 compared to $91,161 in 2000.  This  decrease  reflects (i) lower
interest incurred of $13,835, (ii) non-recurring costs in 2000 of $4,206 related
to the  prepayment and  modification  to the terms of certain  indebtedness  and
(iii) increased amortization of debt premiums of $87. Partially offsetting these
items  were (i)  higher  amortization  of  deferred  financing  costs of  $3,419
primarily  related to the Mezzanine Loan  originated in December 2000 and (ii) a
decrease in the amount of interest  capitalized in connection  with  development
activities of $3,412.

     The decrease in interest incurred is primarily  attributable to a reduction
of $239,243 in our weighted-average  debt outstanding,  excluding debt premiums,
during the year ended December 31, 2001 compared to the same period in 2000. The
effect of the  reduction in  weighted-average  debt  outstanding  was  partially
offset by an increase in the  weighted-average  contractual interest rate on our
debt for the year ended  December 31, 2001  compared to the same period in 2000.
The  decrease  in  weighted-average  debt was  primarily  attributable  to asset
dispositions.  The weighted-average contractual interest rates for 2001 and 2000
were 9.27% and 8.48%, respectively.

     Other  charges  were  $19,632 and $22,907 for the years ended  December 31,
2001 and 2000,  respectively,  which includes  non-recurring charges aggregating
$4,918 and $8,432,  respectively.  Excluding  the effect of these  non-recurring
items,  which are discussed below,  other charges increased by $239, or 1.7%, to
$14,714 for the year ended  December  31, 2001  compared to $14,475 for the same
period in 2000.  This  increase was  primarily  attributable  to higher bad debt
expense of $2,742 (resulting in part from certain tenant bankruptcies, disputes,
abandonments and store closings during the 2001 period)  partially offset by (i)
lower  ground  lease  expense  of  $1,172  (resulting  from  the  2000  Property
Dispositions),  (ii) lower marketing  expenses of $1,020 and (iii) a decrease in
all other expenses of $313.

     During the fourth  quarter of 2001, we recorded a  non-recurring  charge in
the amount of $2,000 to  establish a reserve for  pending and  potential  tenant
claims with respect to lease provisions  related to their  pass-through  charges
and promotional fund charges. Additionally, the 2001 results include (i) a third
quarter  non-recurring  loss of  $1,882  related  to an  interest  rate  subsidy
agreement and (ii) a third quarter  non-recurring  loss of $1,036 related to the
refinancing of first  mortgage  loans on the Birch Run Center.  The 2000 results
include (i) non-recurring  costs of $5,517 related to eOutlets.com (as discussed
below),  (ii) a loss on operations of our Designer  Connection  outlet stores of
$1,815 and (iii)  non-recurring  third  quarter  costs of $1,100  related to the
termination  of a sale  agreement.  We ceased  the  operations  of our  Designer
Connection outlet stores during 2000.

     During the third  quarter of 2001, we  determined  that certain  events and
circumstances  had occurred,  including  reduced  occupancy and limited  leasing
success, that indicated that certain of our properties were impaired on an other
than temporary basis. As a result,  we recorded a provision for asset impairment
aggregating $63,026,  representing the write-down of the carrying value of these
properties to their estimated fair values.  During 2000, we recorded a provision
for asset impairment  aggregating  $77,115.  This provision for asset impairment
consisted  of  (i) a  $28,047  write-down  of  the  carrying  value  of  certain
properties  resulting from their  classification to assets held for sale, (ii) a
$40,616 write-down of the carrying values of certain  properties  resulting from
other than  temporary  declines  in their  values and (iii) a $8,452  write-down
associated with our discontinuance of eOutlets.com.

     In  April  2000,  we  announced  that we had been  unable  to  conclude  an
agreement  to transfer  ownership  of our  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.  eOutlets.com  was a new,  development-stage,
internet-based   business.   During  2000,  we  incurred  a  non-recurring  loss
aggregating  $14,703  related to  eOutlets.com.  This loss  consisted of (i) the
write-off  of $8,452 of  capitalized  costs  (included  in  provision  for asset
impairment),  (ii) $5,517 of costs  included in other  charges and (iii) $734 of
costs included in corporate general and administrative expense.

<PAGE>
                                  Page - (24)

Liquidity and Capital Resources

Sources and Uses of Cash

     For the year ended  December  31,  2002,  net cash  provided  by  operating
activities  was $29,827,  net cash provided by investing  activities was $41,748
and net cash used in financing activities was $72,204.

     The net cash  provided  by  investing  activities  during  the  year  ended
December  31, 2002  consisted  of $49,461 of  aggregate  net  proceeds  from the
disposition  of  properties,  partially  offset by $7,713 of additions to rental
property.  These  additions to rental  property  included (i) costs  incurred in
connection  with  re-leasing  space to new  merchants  of $5,360  and (ii) costs
associated with renovations of $2,353.  During the year ended December 31, 2002,
we did not engage in any development  activities  other than certain  consulting
activities in Europe,  which did not have a significant  impact on our liquidity
or financial condition.

     The gross uses of cash for  financing  activities  of $72,204  during  year
ended December 31, 2002  consisted of (i) scheduled  principal  amortization  on
debt of $14,129 and (ii) principal  repayments on the Mezzanine Loan aggregating
$63,029 including $10,341 of mandatory  prepayments,  with net proceeds from the
sales of properties.

     The following tables summarize our contractual obligations and other
commitments as of December 31, 2002:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                Payments Due by Period
                                                   ---------------------------------------------------------------------------------
                                                                        Less than                                          After
Contractual Obligations (1)                             Total             1 year        1 to 3 years    4 to 5 years      5 years
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>               <C>               <C>            <C>             <C>
Bonds payable                                          $  22,495         $      680        $  1,499       $   1,698       $ 18,618
Notes payable, excluding debt premiums                   462,238            266,659          14,649         121,439         59,491
Defeased notes payable                                    74,764             74,764
Mandatory Redemption Obligation                           16,667             16,667
Interest rate guarantee obligation                         1,477                177            1368             377            555
Operating lease payments                                   8,713              1,519           1,547             469          5,178
                                                       ---------         ----------        --------       ---------       --------
  Total                                                $ 586,354         $  360,466        $ 18,063       $ 123,983       $ 83,842
                                                       =========         ==========        ========       =========       ========
====================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                Annualized
                                                         In Arrears as           Dividend
Preferred Stock Dividends (2)                             of 12/31/02          Requirement
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                    <C>
Series A Senior Preferred Stock                          $ 18,867               $  6,037
Series B Convertible Preferred Stock                       51,984                 16,635
                                                         --------               --------
  Total                                                  $ 70,851               $ 22,672
                                                         ========               ========
====================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                         Amount of
                                                        Guarantee as              Maturity
Guarantees of Indebtedness of Others(3)                 of 12/31/02               Date
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                    <C>
HGP mortgage loan facility                               $  4,000               July 2005
HGP office and equipment debt                               2,240               April 2003
First Mortgage Loan - Prime Outlets at Hagerstown          46,862               June 2004
                                                         --------
  Total                                                  $ 53,102
                                                         ========
====================================================================================================================================
</TABLE>

Notes:
(1)  Notes   payable,   excluding   debt  premiums  also  excludes   contractual
     obligations related to four outlet centers secured by non-recourse mortgage
     indebtedness  that is  currently  in  default  (see  "Defaults  on  Certain
     Non-recourse  Mortgage  Indebtedness"  for  additional  information).   For
     additional  information  with  respect  to our  indebtedness,  see Note 6 -
     "Debt" of the Notes to Consolidated  Financial Statements.  For information
     regarding the  "Mandatory  Redemption  Obligation"  and the "Interest  Rate
     Subsidy  Obligation"  see  "Guarantees  and Guarantees of  Indebtedness  of
     Others".  For information  regarding future  operating lease payments,  see
     Note  11 -  "Lease  Agreements"  of the  Notes  to  Consolidated  Financial
     Statements.
(2)  See "Dividends and Distributions" for additional information.
(3)  See  "Guarantees  and Guarantees of  Indebtedness of Others" for additional
     information.

<PAGE>
                                  Page - (25)

Guarantees and Guarantees of Indebtedness of Others

HGP Guarantees

     On July 15, 2002, Horizon Group Properties, Inc. and its affiliates ("HGP")
announced they had refinanced a secured credit facility (the "HGP Secured Credit
Facility")  through  a series  of new loans  aggregating  $32,500.  Prior to the
refinancing,  we were a guarantor  under the HGP Secured Credit  Facility in the
amount of $10,000. In connection with the refinancing, our guarantee was reduced
to a maximum  of  $4,000 as  security  for a $3,000  mortgage  loan and a $4,000
mortgage loan  (collectively,  the "HGP Monroe  Mortgage Loan") secured by HGP's
outlet shopping center located in Monroe, Michigan. The HGP Monroe Mortgage Loan
has a 3-year term,  bears  interest at the prime lending rate plus 2.50% (with a
minimum of 9.90%) and requires monthly  interest-only  payments.  The HGP Monroe
Mortgage Loan may be prepaid without penalty after two years. Our guarantee with
respect to the HGP Monroe  Mortgage Loan will be  extinguished  if the principal
amount of such obligation is reduced to $5,000 or less through repayments.

     Additionally,   we  are  a  guarantor  with  respect  to  certain  mortgage
indebtedness  (the "HGP Office  Building  Mortgage")  in the amount of $2,240 on
HGP's corporate office building and related  equipment located in Norton Shores,
Michigan. The HGP Office Building Mortgage matures in April 2003, bears interest
at LIBOR plus 5.50%, and requires monthly debt service payments.

     On October 11, 2001,  HGP announced  that it was in default under two loans
with an aggregate  principal  balance of approximately  $45.5 million secured by
six of its other outlet centers.  Such defaults do not constitute defaults under
the HGP Monroe  Mortgage Loan or the HGP Office  Building  Mortgage nor did they
constitute a default under the HGP Secured Credit Facility. We have not recorded
any liabilities  related to these  guarantees and no claims have been made under
our  guarantees  with respect to the HGP Monroe  Mortgage Loan or the HGP Office
Building  Mortgage.  HGP  is a  publicly  traded  company  that  was  formed  in
connection with our merger with Horizon Group, Inc. ("Horizon") in June 1998.

Prime/Estein Venture Guarantees

     We  own  three  outlet  centers  through  the  Prime/Estein   Venture.  The
Prime/Estein  Venture is an unconsolidated joint venture partnership between one
of our affiliates and an affiliate of Estein & Associates USA, Ltd.  ("Estein"),
a real  estate  investment  company.  Pursuant to  Prime/Estein  Venture-related
documents to which  affiliates of ours are parties,  we are obligated to provide
to, or obtain for, the Prime/Estein  Venture  fixed-rate  financing at an annual
rate of 7.75% (the "Interest Rate Subsidy  Agreement") for the Birch Run Center,
the Prime Outlets at Williamsburg (the "Williamsburg Center") and the Hagerstown
Center.

     In August 2001, we, through affiliates,  completed a refinancing of $63,000
of first  mortgage loans secured by the Birch Run Center.  The  refinanced  loan
(the "Birch Run First Mortgage") (i) has a term of 10-years, (ii) bears interest
at an effective rate of 8.12% and (iii) requires  monthly  payments of principal
and  interest  pursuant  to a 25-year  amortization  schedule.  Pursuant  to the
Interest  Rate Subsidy  Agreement,  we are  required to pay to the  Prime/Estein
Venture the  difference  between the cost of the financing at an assumed rate of
7.75% and the actual  cost of such  financing  at the annual  rate of 8.12% (the
"Interest  Rate Subsidy  Obligation").  The total  payments to the  Prime/Estein
Venture  by us over  the term of the  Birch  Run  First  Mortgage  Loan  will be
approximately  $2,723.  In  connection  with  the  refinancing,  we  recorded  a
non-recurring  loss of $1,882  (included  in other  charges in the  accompanying
Consolidated  Statements  of  Operations)  during  the  third  quarter  of  2001
representing  the net present  value of the Interest  Rate  Subsidy  Obligation.
Additionally,  we  also  incurred  $1,036  of  non-recurring  refinancing  costs
(included  in other  charges) in the third  quarter of 2001.  As of December 31,
2002,  the Interest Rate Subsidy  Obligation  (included in accounts  payable and
other liabilities in the accompanying Consolidated Balance Sheet) was $1,477.

     In October 2001, we,  through  affiliates,  completed the  refinancing of a
$32,500 first mortgage loan secured by the  Williamsburg  Center.  The new first
mortgage loan (the  "Williamsburg  First  Mortgage") (i) has a term of 10-years,
(ii) bears interest at a fixed-rate of 7.69% and (iii) requires monthly payments
of principal and interest pursuant to a 25-year amortization schedule.  Pursuant
to the Interest Rate Subsidy Agreement,  the Prime/Estein Venture is required to
pay to us the difference between the cost of the financing at an assumed rate of
7.75% and the actual cost of such financing at the annual rate of 7.69%.

<PAGE>
                                  Page - (26)

     On January 11,  2002,  we sold the  Hagerstown  Center to the  Prime/Estein
Venture.  In connection  with the sale,  the  Prime/Estein  Venture  assumed the
Hagerstown  First Mortgage in the amount of $46,862;  however,  our guarantee of
such indebtedness remains in place. Additionally,  we are obligated to refinance
the Hagerstown First Mortgage on behalf of the Prime/Estein Venture on or before
June 1, 2004, the date on which such  indebtedness  matures.  Additionally,  the
Prime/Estein Venture's cost of the Hagerstown First Mortgage and any refinancing
of it are  fixed at an annual  rate of 7.75%  for a period  of 10 years.  If the
actual  cost of such  indebtedness  should  exceed  7.75% at any time during the
10-year period,  we will be obligated to pay the difference to the  Prime/Estein
Venture.  If the actual cost of such indebtedness is less than 7.75% at any time
during the 10-year period,  however,  the Prime/Estein Venture will be obligated
to pay the difference to us. The actual cost of the Hagerstown First Mortgage is
30-day  LIBOR  plus  1.50%,  or 2.88%  as of  December  31,  2002.  Because  the
Hagerstown  First  Mortgage bears interest at a variable rate, we are exposed to
the impact of interest rate changes.  We have not recorded any liability related
to our guarantee of the Hagerstown First Mortgage;  however,  in connection with
the sale of the  Hagerstown  Center,  we  established  a reserve  for  estimated
refinancing  costs in the amount of $937,  which is included in accounts payable
and other  liabilities  in the  accompanying  Consolidated  Balance  Sheet as of
December  31,  2002.  See  Note 3 -  "Property  Dispositions"  of the  Notes  to
Consolidated Financial Statements for additional information.

Mandatory Redemption Obligation

     In  connection  with our sale of the Bridge  Properties  in July  2002,  we
guaranteed  FRIT PRT Bridge  Acquisition  LLC  ("FRIT")  (i) a 13% return on its
$17,236 of invested  capital and (ii) the full  return of its  invested  capital
(the  "Mandatory  Redemption  Obligation")  in FPI by December 31,  2003.  As of
December 31, 2002, our Mandatory Redemption  Obligation with respect to the full
return of FRIT's invested capital was $16,667  (included in accounts payable and
other liabilities in the accompanying  Consolidated Balance Sheet). See Note 3 -
"Property  Dispositions" of the Notes to Consolidated  Financial  Statements for
additional information.

Defaults on Certain Non-recourse Mortgage Indebtedness

     During 2001,  certain of our  subsidiaries  suspended  regularly  scheduled
monthly debt service  payments on two  non-recourse  mortgage  loans held by New
York Life  Insurance  Company  ("New York Life") at the time of the  suspension.
These non-recourse mortgage loans were cross-defaulted and  cross-collateralized
by Prime Outlets at Conroe (the "Conroe Center"),  located in Conroe, Texas, and
Prime Outlets at Jeffersonville II (the "Jeffersonville II Center"),  located in
Jeffersonville, Ohio. Effective January 1, 2002, New York Life foreclosed on the
Conroe  Center.  Effective July 18, 2002, New York Life sold its interest in the
Jeffersonville  II Center loan. On August 13, 2002, we transferred our ownership
interest in the Jeffersonville II Center to New York Life's successor.  See Note
3 - "Property Dispositions" for additional information.

     The  foreclosure of the Conroe Center did not have a material impact on our
results of operations or financial condition because during 2001 all excess cash
flow from the  operations  of the Conroe Center was utilized for debt service on
its  non-recourse  mortgage  loan.  Additionally,  the transfer of our ownership
interest in the  Jeffersonville  II Center did not have a material impact on our
results of operations or financial condition because during 2001 and through the
transfer  date in  2002,  all  excess  cash  flow  from  the  operations  of the
Jeffersonville  II Center was  utilized  for debt  service  on the  non-recourse
mortgage loan.

     During  August of 2002,  certain of our  subsidiaries  suspended  regularly
scheduled monthly debt service payments on two non-recourse mortgage loans which
were  cross-collateralized  by Prime  Outlets at Vero  Beach  (the  "Vero  Beach
Center"),  located in Vero Beach,  Florida,  and Prime  Outlets at Woodbury (the
"Woodbury  Center"),  located in Woodbury,  Minnesota  (collectively,  the "John
Hancock  Properties").  These  non-recourse  mortgage  loans  were  held by John
Hancock Life Insurance  Company ("John Hancock").  Effective  September 9, 2002,
John Hancock foreclosed on the Vero Beach Center. Additionally, we are currently
negotiating a transfer of our ownership  interest in the Woodbury Center to John
Hancock. Foreclosure on the Vero Beach Center did not, and the expected transfer
of our  ownership  interest in the  Woodbury  Center is not,  expected to have a
material  impact on our results of  operations  or financial  condition  because
during  2002,  all  excess  cash flow from the  operations  of the John  Hancock
Properties was utilized for debt service on their non-recourse mortgage loans.

<PAGE>
                                  Page - (27)

     In December 2002, we notified the servicer of certain non-recourse mortgage
loans  (cross-collateralized  by Prime  Outlets at Bend,  Prime  Outlets at Post
Falls and Prime Outlets at Sedona) totaling $24,919 as of December 31, 2002 that
the net cash flow from the  properties  securing the loans was  insufficient  to
fully pay the  required  monthly  debt  service.  At that  time,  certain of our
subsidiaries  suspended the regularly  scheduled  monthly debt service payments.
Subsequent  to our  notification  to the servicer,  we have been  remitting on a
monthly basis all available cash flow from the  properties,  after a reserve for
monthly operating expenses,  as partial payment of the debt service. The failure
to pay the full amount due constitutes a default under the loan agreements which
allows the  lenders to  accelerate  the loan and to  exercise  various  remedies
contained in the loan  agreements,  including  application of escrow balances to
delinquent  payments  and,  ultimately,  foreclosure  on  the  properties  which
collateralize  the loans. The lender has notified us that it has accelerated the
loan.  Since that time we have  initiated  discussions  with the servicer of the
loans regarding  restructuring of the loans. There can be no assurance that such
discussions will result in any modification to the terms of the loans.  However,
any action by the lender with  respect to these  properties  is not  expected to
have a material  impact on our  results of  operations  or  financial  condition
because we are currently only remitting available cash flow.

Defeasance of Mega Deal Loan

     On December 6, 2002, we completed the sale of two outlet centers (together,
the "Colorado  Properties"),  which were part of the 15 properties  contained in
the collateral pool securing a first mortgage and expansion loan (the "Mega Deal
Loan"), which had a then outstanding balance of $338,940. In connection with the
release of the Colorado Properties from the collateral pool, we were required to
partially  defease  the  Mega  Deal  Loan.  Therefore,  the Mega  Deal  Loan was
bifurcated  into (i) a defeased  portion in the amount of $74,849 (the "Defeased
Notes Payable") and (ii) an undefeased portion in the amount of $264,091,  which
is still referred to as the Mega Deal Loan.  Both the Defeased Notes Payable and
the Mega Deal Loan (i) bear  interest at a  fixed-rate  of 7.782%,  (ii) require
monthly  payments of principal and interest  pursuant to a 30-year  amortization
schedule  and  (iii)  mature on  November  11,  2003.  The Mega Deal Loan is now
secured by the remaining 13 properties contained in the collateral pool. We used
$79,257  of the  gross  proceeds  from the sale of the  Colorado  Properties  to
purchase US Treasury  Securities,  which were placed into a trustee  escrow (the
"Trustee Escrow"). The Trustee Escrow is used to make the scheduled monthly debt
service  payments,  including  the  payment  of the then  outstanding  principal
amount,  together  with all accrued and unpaid  interest on the maturity date of
November 11, 2003,  under the Defeased Notes  Payable.  As of December 31, 2002,
the  outstanding  balance of the  Defeased  Notes  Payable  was  $74,764 and the
balance of the Trustee  Escrow was $79,042  (included in restricted  cash in the
accompanying  Consolidated Balance Sheet). See Note 3 - "Property  Dispositions"
of the Notes to Consolidated  Financial  Statements for additional  information.
Furthermore,  in connection with the partial defeasance of the Mega Deal Loan we
amended  the Mega  Deal  Loan so that  (i) we are  required  to fund 10  monthly
payments of $500 into a lender escrow to be used as additional  cash  collateral
and (ii) release prices for the remaining 13 properties in the  collateral  pool
were amended to provide for a more orderly refinancing of the Mega Deal Loan.

Debt Service Obligations

     The scheduled principal  maturities of our debt,  excluding (i) unamortized
debt  premiums of $7,955 and (ii)  $41,250 of  aggregate  non-recourse  mortgage
indebtedness  in  default  (see  "Defaults  on  Certain  Non-recourse   Mortgage
Indebtedness"  above), and related average contractual interest rates by year of
maturity as of December 31, 2002 are as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                     Bonds Payable
                                  (including sinking                                       Defeased
                                    fund payments)            Notes Payable              Notes Payable               Total Debt
                                 ---------------------  ------------------------    ----------------------   -----------------------
                                   Average                Average                      Average                Average
                                  Interest  Principal    Interest     Principal       Interest   Principal    Interest   Principal
Years Ended December 31,           Rates    Maturities    Rates       Maturities       Rates     Maturities    Rates     Maturities
------------------------------------------------------------------------------------------------------------------------------------
<C>                                <C>     <C>             <C>        <C>              <C>        <C>           <C>       <C>
2003                               6.33%   $    680        7.79%      $ 266,659        7.78%      $ 74,764      7.78%     $ 342,103
2004                               6.34%        726        8.44%          3,075                                 8.04%         3,801
2005                               6.34%        773        8.58%         11,574                                 8.44%        12,347
2006                               6.34%        820        8.83%        120,437                                 8.81%       121,257
2007                               6.34%        878        7.60%          1,002                                 7.02%         1,880
Thereafter                         6.52%     18,618        7.57%         59,491                                 7.32%        78,109
                                   ----    --------        ----       ---------        ----       --------      ----      ----------
                                   6.49%   $ 22,495        8.06%      $ 462,238        7.78%      $ 74,764      7.96%     $ 559,497
                                   ====    ========        ====       =========        ====       ========      ====      ==========
====================================================================================================================================
</TABLE>

     Such indebtedness in the amount of $559,497 had a weighted-average maturity
of 2.6 years and bore contractual  interest at a weighted-average  rate of 7.96%
per annum. At December 31, 2002, all of such indebtedness bore interest at fixed
rates.  Our  scheduled  principal  payments  during  2003 for such  indebtedness
aggregated $342,103. In addition to regularly scheduled principal payments,  the
2003 scheduled  principal payments also reflect balloon payments of (i) $260,681
for the Mega Deal Loan and (ii) $73,882 due for the Defeased Notes Payable. Both
the Mega Deal Loan and the  Defeased  Notes  Payable are  scheduled to mature on
November  11,  2003.  All debt  service due under the  Defeased  Notes  Payable,
including  the balloon  payment due at  maturity,  will be made from the Trustee
Escrow. See "Going Concern" for additional information.

<PAGE>
                                  Page - (28)

Going Concern

     Our liquidity  depends on cash provided by operations and potential capital
raising  activities  such as funds  obtained  through  borrowings,  particularly
refinancing of existing debt, and cash generated  through asset sales.  Although
we believe that  estimated  cash flows from  operations  and  potential  capital
raising  activities will be sufficient to satisfy our scheduled debt service and
other  obligations and sustain our operations for the next year, there can be no
assurance  that we will be successful in obtaining the required  amount of funds
for these items or that the terms of the potential  capital raising  activities,
if they should  occur,  will be as  favorable  as we have  experienced  in prior
periods.

     During 2003, our Mega Deal Loan matures on November 11, 2003. The Mega Deal
Loan,  which is secured by a 13 property  collateral  pool,  had an  outstanding
principal balance of $263,793 as of December 31, 2002 and will require a balloon
payment of $260,681 at maturity.  Based on our initial  discussions with various
prospective  lenders,  we are currently  projecting a potential  shortfall  with
respect to refinancing  the Mega Deal Loan.  However,  we believe this shortfall
may be alleviated  through  potential  asset sales and/or other capital  raising
activities, including the placement of mezzanine level debt. We caution that our
assumptions are based on current market conditions and,  therefore,  are subject
to various risks and  uncertainties,  including  changes in economic  conditions
which may  adversely  impact  our  ability  to  refinance  the Mega Deal Loan at
favorable  rates or in a timely  and  orderly  fashion,  or which may  adversely
impact our ability to consummate  various  asset sales or other capital  raising
activities.

     In connection  with the completion of the sale of the Bridge  Properties in
July 2002,  we  guaranteed  to FRIT (i) a 13% return on its  $17,236 of invested
capital,  and  (ii) the full  return  the  Mandatory  Redemption  Obligation  by
December  31,  2003.  Although  we are in the  process of  seeking  to  generate
additional  liquidity to repay the Mandatory  Redemption  Obligation through (i)
the sale of FRIT's ownership  interest in the Bridge  Properties and/or (ii) the
placement of additional  indebtedness on the Bridge Properties,  there can be no
assurance  that we will be able to complete such capital  raising  activities by
December 31, 2003 or that such capital raising activities, if they should occur,
will generate sufficient proceeds to repay the Mandatory  Redemption  Obligation
in full.  Failure to repay the Mandatory  Redemption  Obligation by December 31,
2003 would constitute a default,  which would enable FRIT to exercise its rights
with respect to the collateral  pledged as security to the guarantee,  including
some of our partnership  interests in the 13 property  collateral pool under the
aforementioned Mega Deal Loan.

     These conditions raise substantial doubt about our ability to continue as a
going  concern.  The financial  statements  contained  herein do not include any
adjustment  to reflect the possible  future  effects on the  recoverability  and
classification  of assets or the amounts and  classification of liabilities that
may result from the outcome of these uncertainties.

Defaults  on   Certain  Non-recourse  Mortgage  Indebtedness  of  Unconsolidated
Partnerships

     Two mortgage loans related to projects in which we,  through  subsidiaries,
indirectly  own joint  venture  interests  have matured and are in default.  The
mortgage loans,  at the time of default,  were (i) a $10,389 first mortgage loan
on Phase I of the Bellport  Outlet  Center,  held by Union Labor Life  Insurance
Company  ("Union  Labor");  and (ii) a  $13,338  first  mortgage  loan on Oxnard
Factory Outlet, an outlet center located in Oxnard, California, held by Fru-Con.
An affiliate of ours has a 50% ownership interest in the partnership, which owns
Phase I of the Bellport Outlet Center.  Fru-Con and us are each a 50% partner in
the partnership that owns the Oxnard Factory Outlet.

     Union Labor filed for  foreclosure on Phase I of the Bellport Outlet Center
and a  receiver  was  appointed  March  27,  2001 by the court  involved  in the
foreclosure action. Effective May 1, 2001, a manager hired by the receiver began
managing  and leasing  Phase I of the  Bellport  Outlet  Center.  A judgment for
foreclosure  was  entered on January  25,  2003 in the  amount of  $12,711.  The
foreclosure  occurred on March 17, 2003 with Union Labor  acquiring the property
for $5,100.  We continue to negotiate  the terms of a transfer of our  ownership
interest in Oxnard Factory  Outlet to Fru-Con.  We do not manage or lease Oxnard
Factory Outlet.

     We  believe  neither  of these  mortgage  loans is  recourse  to us.  It is
possible,  however,  that either or both of the respective  lenders will,  after
completing its foreclosure action, file a lawsuit seeking to collect from us the
difference  between the value of the mortgaged property and the amount due under
the loan. If such an action is brought, the outcome, and our ultimate liability,
if any, cannot be predicted at this time.

     In addition,  we are currently not receiving,  directly or indirectly,  any
cash flow from Oxnard  Factory  Outlet and were not receiving any cash flow from
Phase I of the  Bellport  Outlet  Center  prior to the loss of  control  of such
project.  We account for our  interests in (i) Phases I of the  Bellport  Outlet
Center and (ii) the Oxnard Factory  Outlet in accordance  with the equity method
of accounting.  As of December 31, 2002, the carrying value of our investment in
these properties was $0.

<PAGE>
                                  Page - (29)

2002 Debt Transactions

     We disposed of certain properties through various  transactions,  including
sale, joint venture arrangements, foreclosure and transfer to lender, during the
year ended December 31, 2002. In connection with these dispositions,  we reduced
our indebtedness by $349,378, including the partial defeasance of $74,849 of the
Mega Deal Loan.  This  reduction  also  includes (i) the repayment of associated
mortgage indebtedness  aggregating $168,982,  (ii) debt assumed by the purchaser
of $46,862 and (iii) debt associated with  foreclosure or transfer of properties
aggregating  $58,685.  See  Note 3 -  "Property  Dispositions"  of the  Notes to
Consolidated Financial Statements for additional information.

     At the beginning of 2002, our Mezzanine Loan had an outstanding  balance of
$62,079.  During 2002 we repaid the Mezzanine Loan in full through (i) regularly
scheduled  monthly  principal  payments   aggregating  $9,295,  (ii)  additional
principal payments  aggregating $45,467 made with excess proceeds from our asset
sales (see Note 3 - "Property  Dispositions"  for  additional  information)  and
(iii) a payoff  of  $7,317  with  cash  from  escrows  and  operating  cash.  In
connection  with the early  extinguishment  of the Mezzanine Loan, we incurred a
non-recurring  loss of $525  (included in interest  expense in the  accompanying
Consolidated   Statements  of   Operations)   in  the  fourth  quarter  of  2002
representing the write-off of remaining  unamortized  deferred  financing costs.
The  Mezzanine  Loan was  obtained in December  2000 in the  original  amount of
$90,000 and was scheduled to mature on September  30, 2003.  Through a series of
amendments and modifications to its terms, the Mezzanine Loan bore interest at a
fixed-rate of 19.75% at the time of retirement.

Dividends and Distributions

     To qualify as a REIT for federal  income tax  purposes,  we are required to
pay  distributions  to our common and preferred  shareholders of at least 90% of
our REIT taxable income in addition to satisfying other  requirements.  Although
we intend to make  distributions,  if necessary,  to remain  qualified as a REIT
under the Code,  we also intend to retain such amounts as we consider  necessary
from time to time for our capital and liquidity needs.

     Our policy  remains to pay  distributions  only to the extent  necessary to
maintain our status as a REIT for federal  income tax purposes.  During 2002, we
were not required to pay any  distributions in order to maintain our status as a
REIT and based on our current federal income tax  projections,  we do not expect
to pay any  distributions  during 2003.  We are currently in arrears on thirteen
quarters of preferred stock distributions due February 15, 2000 through February
15, 2003, respectively.

     We may not make distributions to our common  shareholders or our holders of
common  units of limited  partnership  interests  in the  Operating  Partnership
unless  we  are  current  with  respect  to   distributions   to  our  preferred
shareholders. As of December 31, 2002, unpaid dividends for the period beginning
on November 16, 1999 through  December 31, 2002 on our Series A Senior Preferred
Stock and Series B Convertible  Preferred Stock aggregated  $18,867 and $51,984,
respectively.  The  annualized  dividends  on our  2,300,000  shares of Series A
Senior  Preferred Stock and 7,828,125  shares of Series B Convertible  Preferred
Stock  outstanding  as of December  31,  2002 are $6,037  ($2.625 per share) and
$16,635 ($2.125 per share), respectively.

Strategic Alternatives

     We have  engaged  Houlihan  Lokey  Howard & Zukin  Capital  to assist us in
exploring  recapitalization,   restructuring,   financing  and  other  strategic
alternatives  designed to  strengthen  our  financial  position  and address our
long-term  capital  requirements.  There can be no  assurance  as to the timing,
terms or completion of any transaction.

Settlement of Tenant Matters

     To date, we have entered into settlement agreements with respect to certain
tenant matters providing for aggregate payments of $2,760.  Through December 31,
2002, we made  approximately  $2,607 of such required  payments.  These payments
were  principally  made from certain funds  escrowed  under our Mezzanine  Loan,
which was repaid in full in December  2002.  The  remaining  payment of $153 was
made in January 2003 with cash from operations.

     These settlement agreements did not have a material impact on our financial
condition or our results from operations. We had previously established reserves
aggregating  $5,000 for the  settlement of such matters.  See Note 12 - "Special
Charges" and Note 13- "Legal Proceedings" of the Notes to Consolidated Financial
Statements for additional information.

<PAGE>
                                  Page - (30)

Development Activities and Capital Expenditures

     During  2003,   we  will  continue  to  explore   potential   international
opportunities and will selectively  consider  expansion and/or  redevelopment of
certain  of our  existing  outlet  centers.  We do  not  currently  expect  such
activities to have a significant impact on our liquidity or financial condition.

     Additionally,  we expect to incur costs during 2003 (i) in connection  with
releasing  space to new  tenants and (ii) for  repairs  and  maintenance  of our
properties.  However,  we do not expect such  expenditures to have a significant
impact on our liquidity or financial  condition  because reserves for such costs
are paid  monthly  into escrow  accounts  under many of our loans.  See Note 4 -
"Restricted Cash" of the Notes to Consolidated Financial Statements for
additional information.

Recent Accounting Pronouncements

     In October,  2001, the Financial Accounting Standards Board ("FASB") issued
FAS No. 144,  "Accounting for Impairment of Disposal of Long-lived  Assets." FAS
No. 144 supercedes FAS No. 121, however it retains the fundamental provisions of
that statement as related to the  recognition  and measurement of the impairment
of  long-lived  assets  to be "held  and  used." In  addition,  FAS No.  144 (i)
provides  further  guidance  regarding  the  estimation  of  cash  flows  in the
performance of a  recoverability  test, (ii) requires that a long-lived asset to
be disposed of other than by sale (e.g.,  abandoned)  be classified as "held and
used" until it is disposed of, and (iii)  established more restrictive  criteria
to  classify  an asset as "held for sale." As  previously  mentioned,  effective
January 1, 2002,  we adopted FAS No. 144. Our adoption of FAS No. 144  effective
January 1, 2002 did not have a material impact on our results of operations or
financial position.

     In May 2002, the FASB issued FAS No. 145,  "Reporting Gains and Losses from
Extinguishment  of Debt",  which  rescinded FAS No. 4, FAS No. 44 and FAS No. 64
and  amended  FAS  No.  13.  FAS  No.  145   addresses   the  income   statement
classification  of gains or losses from the  extinguishment of debt and criteria
for  classification as extraordinary  items. FAS No. 145 is effective for fiscal
years beginning after May 15, 2002. We early adopted FAS No. 145 on December 31,
2002.  As a result of our  adoption  of FAS No.  145,  any  non-recurring  costs
incurred in connection with the early extinguishment of debt are classified as a
component of interest  expense in the  accompanying  Consolidated  Statements of
Operations for all periods presented.  Nevertheless, the adoption of FAS No. 145
did not have a  material  impact  on our  results  of  operations  or  financial
position.

     In  December  2002,  the  FASB  issued   Interpretation   ("FIN")  No.  45,
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees  of  Indebtedness  of Others." FIN No. 45 elaborates on the
disclosures to be made by a guarantor in interim and annual financial statements
about the obligations under certain guarantees. FIN No. 45 also clarifies that a
guarantor  is required to  recognize,  at the  inception  of the  guarantee,  an
initial liability for the fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements of FIN No. 45 are effective for financial
statements  of interim or annual  periods  ending after  December  15, 2002.  We
adopted the disclosure provisions of FIN No. 45 effective December 31, 2002. The
initial  recognition  and  initial  measurement  provisions  of FIN  No.  45 are
applicable  on a  prospective  basis to  guarantees  issued  or  modified  after
December 31, 2002. We are in the process of determining  the impact,  if any, on
our results of  operations or financial  condition  from the adoption of FIN No.
45. See "Guarantees and Guarantees of Indebtedness of Others"  contained in Note
6 - "Debt" of the Notes to  Consolidated  Financial  Statements  for  additional
information.

     In January  2003,  the FASB issued FIN No. 46,  "Consolidation  of Variable
Interest  Entities." FIN No. 46 clarifies the application of existing accounting
pronouncements  to certain  entities in which  equity  investors do not have the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial support from other parties. The provisions of FIN No. 46
will be immediately  effective for all variable  interests in variable  interest
entities  created  after  January  31,  2003,  and we  will  need to  apply  the
provisions of FIN No. 46 to any existing variable interests in variable interest
entities by no later than  December 31, 2004.  We do not believe that FIN No. 46
will have a significant impact on our financial statements.

Risk Management Activities

     We are subject to various market risks and  uncertainties,  including,  but
not limited to, the effects of current and future economic  conditions,  and the
resulting  impact on our revenue;  the effects of  increases in market  interest
rates from  current  levels (see  below);  the risks  associated  with  existing
vacancy  rates or potential  increases in vacancy  rates because of, among other
factors, tenant bankruptcies and store closures, and the resulting impact on our
revenue;  and risks  associated with refinancing our current debt obligations or
obtaining new financing  under terms less favorable than we have  experienced in
prior periods.

<PAGE>
                                  Page - (31)

Interest Rate Risk

     In the  ordinary  course  of  business,  we are  exposed  to the  impact of
interest rate changes.  We employ established  policies and procedures to manage
our exposure to interest rate changes. Historically, we have used a mix of fixed
and  variable-rate  debt to (i) limit the impact of interest rate changes on our
results  from  operations  and cash flows and (ii) lower our  overall  borrowing
costs. In certain cases, we have used derivative  financial  instruments such as
interest rate protection agreements to manage interest rate risk associated with
variable-rate  indebtedness.  Nevertheless,  as of December 31, 2002, all of our
outstanding  indebtedness  bore  interest at fixed  rates.  See Item 7 Item 7A -
"Quantitative  and Qualitative  Disclosures  About Material Risk" for additional
information.

Economic Conditions

     In general,  the leases  relating to our outlet centers have terms of three
to five years and most contain  provisions that somewhat  mitigate the impact of
inflation.  Such provisions include clauses providing for increases in base rent
and clauses  enabling us to receive  percentage rents for annual sales in excess
of certain  thresholds  based on  merchants'  gross sales.  In  addition,  lease
agreements generally provide for (i) the recovery of a merchant's  proportionate
share of actual  costs of  common  area  maintenance  ("CAM"),  refuse  removal,
insurance,  and real estate  taxes,  (ii) a  contribution  for  advertising  and
promotion and (iii) an administrative fee. CAM includes items such as utilities,
security, parking lot cleaning,  maintenance and repair of common areas, capital
replacement  reserves,   landscaping,   seasonal  decorations,  public  restroom
maintenance  and certain  administrative  expenses.  We continually  monitor our
lease provisions in light of current and expected economic  conditions and other
factors.  In this regard,  we may consider  alternative  lease provisions (e.g.,
fixed CAM) where appropriate.

Funds from Operations

     Industry  analysts  generally  consider funds from operations  ("FFO"),  as
defined by the National Association of Real Estate Investment Trusts ("NAREIT"),
an  alternative  non-GAAP  measure of  performance  of an equity REIT.  In 1991,
NAREIT  adopted its  definition of FFO. This  definition  was clarified in 1995,
1999 and  2002.  FFO is  currently  defined  by  NAREIT  as net  income  or loss
(computed in accordance  with GAAP),  excluding  gains or losses from provisions
for  asset  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  partnerships and joint ventures and discontinued operations. FFO
includes   non-recurring   events,   except  for  those  that  are   defined  as
"extraordinary  items" in accordance with GAAP. FFO excludes the earnings impact
of  "cumulative  effects of  accounting  changes" as defined by GAAP.  Effective
January  1,  2002,  FFO  related  to  assets  held for sale,  sold or  otherwise
transferred  and included in results of  discontinued  operations (in accordance
with the requirements of FAS No. 144) should continue to be included in FFO.

     We believe that FFO is an important and widely used non-GAAP 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 our
performance.  Our 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 we do. Therefore, we caution that the
calculation of FFO may vary from entity to entity and, as such the  presentation
of FFO by us may not be comparable to other  similarly  titled measures of other
reporting companies.  We believe that to facilitate a clear understanding of our
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 our  performance or to cash flows
as a measure of liquidity or ability to make distributions.

     TABLE 10  provides  a  reconciliation  of loss from  continuing  operations
before allocations to minority  interests and preferred  shareholders to FFO for
the years ended December 31, 2002, 2001 and 2000. FFO decreased $2,374, or 9.4%,
to $22,882 for the year ended December 31, 2002 from $25,256 for the same period
in 2001. FFO decreased $32,711, or 56.4%, to $25,256 for the year ended December
31, 2001 from $57,967 for the year ended December 31, 2000.

     The  2002  FFO  results  include  a  second  quarter  non-recurring  charge
(included in other  charges) of $3,000  related to pending and potential  tenant
claims with respect to certain lease  provisions.  The 2001 FFO results  include
non-recurring  charges and losses aggregating $3,036 (included in other charges)
consisting of (i) a fourth  quarter  non-recurring  of $2,000 related to pending
and potential  tenant claims with respect to certain lease provisions and (ii) a
third quarter  non-recurring  loss of $1,036 related to the refinancing of first
mortgage  loans on the  Birch  Run  Center.  The 2000 FFO  results  include  net
non-recurring   items  totaling  ($2,504).   Such  non-recurring  items  include
non-recurring   costs   aggregating   $4,876   consisting  of  (i)  general  and
administrative  costs  aggregating  $3,876 and (ii) $1,100 of costs (included in
other charges) related to the termination of a sale agreement;  partially offset
by (iii) a gain on the sale of  outparcel  land of $2,472  (included in interest
and other income).  Excluding the net impact of these  non-recurring  items, FFO
was $25,882, $28,292 and $60,471 for the years ended December 31, 2002, 2001 and
2000, respectively.

<PAGE>
                                  Page - (32)

Table 10 - Funds from Operations

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                     2002               2001                2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                 <C>                <C>
Loss from continuing operations
  before minority interests                                               $ (101,010)         $ (99,945)         $ (147,843)
Adjustments:
  Loss (gain) on sale of real estate                                          (5,802)             1,063              42,648
  Provision for asset impairment                                              84,093             63,026              68,663
  Depreciation and amortization                                               34,301             45,863              57,930
  Non-real estate depreciation and amortization                               (2,166)            (2,251)             (1,703)
  Unconsolidated joint ventures' adjustments                                   3,957              3,074               3,269
  Non-cash partnership interest subsidy                                            -              1,882                   -
  Discontinued operations                                                      1,942              1,489               4,653
  Discontinued operations - net gain on dispositions                         (26,152)                 -                   -
  Discontinued operations - provision for impairment                          27,757                  -                   -
  Discontinued operations - depreciation and amortization                      5,437             11,055               9,626
                                                                          ----------          ---------          ----------
FFO before adjustments for non-recurring losses                               22,357             25,256              37,243
  Non-recurring loss on early extinguishment of debt(1)                          525                  -               4,206
  Loss on eOutlets(2)                                                              -                  -              14,703
  Loss on Designer Connection(2)                                                   -                  -               1,815
                                                                          ----------          ---------          ----------
FFO before allocations to minority interests
  and preferred shareholders                                              $   22,882          $  25,256          $   57,967
                                                                          ==========          =========          ==========

Other Data:
Net cash provided by operating activities                                 $   29,827          $  32,911          $   32,450
Net cash provided by investing activities                                     41,748              5,595               1,095
Net cash used in financing activities                                        (72,204)           (39,875)            (31,982)
====================================================================================================================================
</TABLE>

Notes:
(1)  Represents  non-recurring  charges  incurred in  connection  with the early
     extinguishment of debt. We adopted FAS No. 145 effective  December 31, 2002
     and, accordingly, classified such costs as a component of interest expense.
     These costs are attributable to financing  activities ancillary to our core
     real operations.
(2)  Represents  the results of business  activities  ancillary to our core real
     estate operations. Due to financial constraints,  we decided to discontinue
     the Designer  Connection and  eOutlets.com  businesses in December 1999 and
     April 2000,  respectively.  See Note 12 - "Special Charges" of the Notes to
     Consolidated Financial Statements for additional information.

<PAGE>
                                  Page - (33)

     TABLE 11  provides  a  reconciliation  of  income  (loss)  from  continuing
operations before allocations to minority  interests and preferred  shareholders
to FFO for each of the quarterly periods in 2002 and 2001.

Table 11 - Consolidated Quarterly Summary of Funds from Operations (1)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                    2002                                       2001
----------------------------------------------------------------------------------------   -----------------------------------------
                                                 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) from continuing operations
  before minority interests                    $(4,770)  $(86,022)   $(20,629)  $ 10,411   $(12,457)   $(73,929)  $(7,441) $ (6,118)
Adjustments:
  Loss (gain) on sale of real estate                 -          -      10,991    (16,793)     1,615           -       180      (732)
  Provision for asset impairment                 2,474     81,619           -          -          -      63,026         -         -
  Depreciation and amortization                  6,537      8,342       9,214     10,208     12,301      11,241    11,114    11,207
  Non-real estate depreciation and
  amortization                                    (473)      (601)       (538)      (554)      (558)       (563)     (562)     (568)
  Unconsolidated joint ventures'
  adjustments                                    1,060      1,151         963        783        866         620     1,033       555
  Non-cash joint venture interest subsidy            -          -           -          -          -       1,882         -         -
  Discontinued operations                       17,712      2,517      (9,557)    (8,730)       127         677       198       487
  Discontinued operations - net (gain)
  loss on disposition                          (16,533)   (17,121)     (2,121)     9,623          -           -         -         -
  Discontinued operations - provision
  for impairment                                     -     15,557      12,200          -          -           -         -         -
  Discontinued operations - depreciation
   and amortization                                241      1,448       1,733      2,015      3,453       2,525     2,609     2,468
                                               -------   --------    --------   --------   --------    --------   -------  --------
FFO before adjustments for non-recurring
  losses                                         6,248      6,890       2,256      6,963      5,347       5,479     7,131     7,299
  Non-recurring loss on early
  extinguishment of debt(2)                        525          -           -          -          -           -         -         -
                                               -------   --------    --------   --------   --------    --------   -------  --------
FFO before allocations to minority
  interests and preferred shareholders         $ 6,773   $  6,890    $  2,256   $  6,963   $  5,347    $  5,479   $ 7,131  $  7,299
                                               =======   ========    ========   ========   ========    ========   =======  ========

Other Data:
Net cash provided by operating activities      $13,401   $  6,490    $  5,268      4,668     12,588       2,163    10,200     7,960
Net cash provided by (used in) investing
activities                                      23,555     (1,478)      9,095     10,576      5,529       4,586    (7,022)    2,502
Net cash used in financing activities          (36,087)    (4,174)    (15,252)  $(16,691)  $(15,402)   $ (6,000)  $(4,795) $(13,678)
====================================================================================================================================
</TABLE>

Notes:
(1)  Certain  prior  quarterly  financial   information  has  been  reclassified
     pursuant to the requirements of FAS No. 144.
(2)  Represents  non-recurring  charges  incurred in  connection  with the early
     extinguishment of debt. We adopted FAS No. 145 effective  December 31, 2002
     and, accordingly, classified such costs as a component of interest expense.
     These costs are attributable to financing  activities ancillary to our core
     real estate operations.

<PAGE>
                                  Page - (34)

     ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MATERIAL RISK

Market Risk Sensitivity

     We are subject to various market risks and  uncertainties,  including,  but
not limited to, the effects of current and future economic  conditions,  and the
resulting  impact on our revenue;  the effects of  increases in market  interest
rates from  current  levels (see  below);  the risks  associated  with  existing
vacancy  rates or potential  increases in vacancy  rates because of, among other
factors, tenant bankruptcies and store closures, and the resulting impact on our
revenue;  and risks  associated with refinancing our current debt obligations or
obtaining new financing  under terms less favorable than we have  experienced in
prior periods.

Interest Rate Risk

       In the ordinary course of business, we are exposed to the impact of
interest rate changes. We employ established policies and procedures to manage
our exposure to interest rate changes. Historically, we have used a mix of fixed
and variable-rate debt to (i) limit the impact of interest rate changes on our
results from operations and cash flows and (ii) lower our overall borrowing
costs. Nevertheless, as of December 31, 2002, all of our outstanding
indebtedness bore interest at fixed rates. The following table provides a
summary of principal cash flows, excluding (i) unamortized debt premiums of
$7,955 and (ii) non-recourse mortgage indebtedness aggregating $41,250 on
certain properties which is in default (see "Defaults on Certain Non-recourse
Mortgage Indebtedness" within "Liquidity and Capital Resources" of Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for additional information), and related contractual interest rates
by fiscal year of maturity. See Note 6 - "Debt" of the Notes to Consolidated
Financial Statements contained herein for additional information with respect to
the terms of our debt instruments.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                     Year of Maturity
------------------------------------------------------------------------------------------------------------------------------------
                                       2003           2004          2005          2006           2007     Thereafter         Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>             <C>          <C>          <C>              <C>           <C>          <C>
Bonds Payable
Principal                          $    680        $   726      $    773     $     820        $   878       $ 18,618     $  22,495
Average interest rate                  6.33%          6.34%         6.34%         6.34%          6.34%          6.52%         6.49%

Notes Payable
Principal                          $266,659        $ 3,075      $ 11,574     $ 120,437        $ 1,002       $ 59,491     $ 462,238
Average interest rate                  7.79%          8.44%         8.58%         8.83%          7.60%          7.57%         8.06%

Defeased Notes Payable
Principal                          $ 74,764                                                                              $  74,764
Average interest rate                  7.78%                                                                                  7.78%
====================================================================================================================================
</TABLE>

     Additionally, we sold Prime Outlets at Hagerstown (the "Hagerstown Center")
on January 11, 2002 to an existing joint venture  partnership (the "Prime/Estein
Venture").  In connection  with the sale, the  Prime/Estein  Venture assumed the
first mortgage loan on the Hagerstown  Center (the "Hagerstown  First Mortgage")
in the amount of $46,862; however, our guarantee of such indebtedness remains in
place. Additionally, we are obligated to refinance the Hagerstown First Mortgage
on behalf of the  Prime/Estein  Venture on or before  June 1, 2004,  the date on
which such indebtedness matures.  Additionally,  the Prime/Estein Venture's cost
of the  Hagerstown  First  Mortgage  and any  refinancing  of it are fixed at an
annual  rate of 7.75%  for a period  of 10  years.  If the  actual  cost of such
indebtedness  should exceed 7.75% at any time during the 10-year period, we will
be obligated to pay the difference to the  Prime/Estein  Venture.  If the actual
cost of such  indebtedness  is less than 7.75% at any time  during  the  10-year
period,  however,  the  Prime/Estein  Venture  will  be  obligated  to  pay  the
difference  to us. The actual cost of the  Hagerstown  First  Mortgage is 30-day
LIBOR plus 1.50%, or 2.88% as of December 31, 2002. Because the Hagerstown First
Mortgage  bears  interest  at a variable  rate,  we are exposed to the impact of
interest rate changes. At December 31, 2002, a hypothetical 100 basis point move
in the LIBOR rate would  impact our  guarantee  by $469.  See Note 3 - "Property
Dispositions" of the Notes to Consolidated  Financial  Statements for additional
information.

              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>
                                  Page - (35)

                                    PART III

                               ITEMS 10, 11 and 13

     The information  required by Items 10, 11, 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 (the
"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,
2003.

    ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Except  as set  forth  herein,  the  information  required  by  Item  12 is
incorporated by reference from the Proxy Statement entitled "Security  Ownership
of Certain Beneficial Owners and Management."

Equity Compensation Plans

     The  following  table  summarizes  information,  as of December  31,  2002,
relating to our equity  compensation  plans pursuant to which grants of options,
restricted  stock,  restricted stock units or other rights to acquire shares may
be granted from time to time.



                      EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
                                                                                                             Number of securities
                                                                                                            remaining available for
                                             Number of securities to             Weighted-average          future issuance under
                                             be issued upon exercise             exercise price            equity compensation
                                             of outstanding options,          of outstanding options,    plans (excluding securities
                                               warrants and rights             warrants and rights       reflected in column (a))
                                           ----------------------------    --------------------------    ---------------------------

<S>                                                <C>                                 <C>                           <C>
Plan Category                                      (a)                                 (b)                           (c)
Equity compensation plans approved
  by stockholders(1)                                    4,060,313 (3)                        $4.83 (4)                     1,225,224
Equity compensation plans not approved
  by stockholders(2)                                            -                                -                                 -

Total(2)                                                4,060,313                            $4.83 (4)                     1,225,224
</TABLE>

Notes:
(1)  Includes the 1994 Stock  Incentive Plan, the 1995 Stock Incentive Plan, the
     1998  Long-Term  Incentive  Plan, the  Nonemployee  Director Plan and plans
     assumed in connection with acquisition transactions.
(2)  Excludes the Prime Retail,  Inc. 2002 Long-term  Incentive  Plan,  which is
     attached  as Exhibit  10.9  hereto.  Awards  under such plan may be paid in
     stock at the Company's discretion.
(3)  Includes  3,377,617  outstanding  options  (including  682,696  outstanding
     options  granted  under  plans  assumed  in  connection  with   acquisition
     transactions).
(4)  Reflects outstanding options at a weighted-average  exercise price of $2.24
     under the 1994 Stock Incentive  Plan,  $4.48 under the 1995 Stock Incentive
     Plan,  $3.06  under the 1998  Long-Term  Incentive  Plan,  $8.50  under the
     Nonemployee Director Plan and $12.75 under plans assumed in connection with
     acquisition transactions.

<PAGE>
                                  Page - (36)

                                     PART IV

                        ITEM 14 - CONTROLS AND PROCEDURES

     The  Company,  under  the  supervision  and with the  participation  of our
management,  including our principal  executive officer and principal  financial
officer,  has  evaluated  the  effectiveness  of the design and operation of our
disclosure  controls  and  procedures  within 90 days of the filing date of this
annual  report.  Based  on  inherent  limitations  in all  control  systems,  no
evaluation of controls can provide  absolute  assurance  that all control issues
and instances of fraud, if any, within the Company have been detected.  However,
based on their  evaluation,  our principal  executive  officer and our principal
financial  officer  have  concluded  that  these  controls  and  procedures  are
effective.   In  addition,   they  concluded  that  there  were  no  significant
deficiencies  in the design or  operation  of  internal  controls,  which  could
significantly  affect  our  ability  to record,  process,  summarize  and report
financial data. There have been no significant  changes in our internal controls
or in other factors which could  significantly  affect these controls subsequent
to the date of their evaluation.

     Our  disclosure  controls and other  procedures are designed to ensure that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded,  processed,  summarized and reported, within
the time periods specified in the Securities and Exchange Commission's rules and
forms. Disclosure controls and procedures include, without limitation,  controls
and procedures  designed to ensure that information  required to be disclosed in
the reports that we file under the Exchange Act is accumulated and  communicated
to our  management,  including  our  principal  executive  officer and principal
financial officer,  as appropriate to allow timely decisions  regarding required
disclosure.

   ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S>   <C>                                                                                                    <C>

(a)   1. Financial Statements

       Report of Independent Auditors                                                                        F-1

       Consolidated Balance Sheets as of December 31, 2002 and 2001                                          F-2

       Consolidated Statements of Operations for the years ended December 31, 2002, 2001 and 2000            F-3

       Consolidated Statements of Cash Flows for the years ended December 31, 2002, 2001 and 2000            F-4

       Consolidated Statements of Shareholders' Equity for the years ended December 31, 2002,                F-6
           2001 and 2000

       Notes to Consolidated Financial Statements                                                            F-7

      2.  Financial Statement Schedules

         The following financial statement schedule is included in Item 15 (d):

         Schedule III--Real Estate and Accumulated Depreciation                                              F-32

         Notes to Schedule III                                                                               F-33
</TABLE>

     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).]

<PAGE>
                                  Page - (37)

      Exhibit
      Number       Description

         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).]

         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  Certificate of the Company
                   dated  December 22, 2000  issued  to  FRIT  PRT  Lending  LLC
                   [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, 2000 (File No. 0-23616).]

         4.5       Warrant to Purchase Common Stock  Certificate  of the Company
                   dated December 22, 2000 issued to Greenwich Capital Financial
                   Products, 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, 2000 (File No. 0-23616).]

        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).]

        10.2       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).]

        10.3       Amendment  No. 2  to  Third Amended and Restated Agreement of
                   Limited Partnership of Prime Retail, L.P., dated as  of April
                   15, 2002.  [Incorporated   by  reference  to  the same titled
                   exhibit in the Company's  Quarterly  Report on  Form 10-Q for
                   the   quarterly   period   ended  March  31,  2002  (File No.
                   001-13301).]

        10.4       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).]

        10.5       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).]

        10.6       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).]

        10.7       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).]

        10.8       Description   of   the    1999   Long-Term   Incentive   Plan
                   [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).]

**      10.9       Prime Retail, Inc. 2002 Long-Term Incentive Plan

        10.10      Employment   agreement   dated  July 24, 2000  between  Prime
                   Retail,  Inc.    and   Glenn D. Reschke.    [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,
                   2001 (File No. 01-13301).]

**      10.11      Second  Amendment  to  Employment Agreement, dated August 12,
                   2002, by and between Prime Retail, Inc. and Glenn D. Reschke.

        10.12      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. 01-13301).]
<PAGE>
                                  Page - (38)

      Exhibit
      Number       Description

        10.13      Amendment to Employment Agreement dated April 2, 2001 between
                   Prime Retail, Inc. and Robert A. Brvenik.   [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, 2001 (File No. 01-13301).]

**      10.14      Third  Amendment  to  Employment  Agreement, dated August 12,
                   2002, by  and  between   Prime   Retail,  Inc. and  Robert A.
                   Brvenik.

        10.15      Employment  Agreement  dated  March  21, 2002  between  Prime
                   Retail,  Inc.  and  R.  Kelvin  Antill.    [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, 2001 (File No. 01-13301).]

**      10.16      Second  Amendment  to  Employment Agreement, dated August 12,
                   2002, by and between Prime Retail, Inc. and R. Kelvin Antill.

        10.17      Employment  Agreement dated  January 10, 2002  between  Prime
                   Retail,  Inc.  and   David G.  Phillips.   [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, 2001 (File No. 01-13301).]

**      10.18      Second  Amendment  to  Employment Agreement, dated August 12,
                   2002,  by  and  between  Prime  Retail,  Inc.  and  David  G.
                   Phillips.

        10.19      Employment  Agreement,  dated  June 6, 2002,  by and  between
                   Prime Retail, Inc. and Frederick J. Meno IV.    [Incorporated
                   by  reference  to  the  same titled  exhibit in the Company's
                   Quarterly  Report on Form 10-Q for the quarterly period ended
                   September 30, 2002 (File No. 01-13301).]

**      10.20      Amendment to Employment Agreement,  dated August 12, 2002, by
                   and between Prime Retail, Inc. and Frederick J. Meno IV.

        10.21      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).]

        10.22      Separation   Agreement  dated  August 24, 2000 by and between
                   Prime  Retail,  Inc.  and  Prime  Retail, L.P. 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, 2000 (File No. 0-23616).]

        10.23      Letter Agreement dated  April 24, 2001  between Prime Retail,
                   Inc., and Prime Retail,  L.P. and Abraham Rosenthal  amending
                   Separation Agreement dated  February 23, 2000.  [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, 2001 (File No. 01-13301).]

        10.24      Letter Agreement dated  April 24, 2001  between Prime Retail,
                   Inc.,  Prime  Retail,  L.P.  and    William H. Carpenter, Jr.
                   amending  Separation    Agreement   dated  August  24,  2000.
                   [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, 2001 (File No. 01-13301).]

        10.25      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).]

        10.26      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).]

        10.27      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).]

        10.28      Form  of  Property   Level  Limited   Partnership   Agreement
                   [Incorporated by reference  to the same titled exhibit in the
                   Company's  registration statement of  Form S-11 (Registration
                   No. 33-68536).]
<PAGE>
                                  Page - (39)

      Exhibit
      Number       Description

        10.29      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, 1996 (File No. 0-23616).]

**      10.30      Release Agreement dated January 22, 2001 by and between Prime
                   Retail, Inc., Prime Retail,  L.P. and Michael W. Reschke.

        10.31      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).]

        10.32      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).]

        10.33      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).]

        10.34      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. 0-23616).]

        10.35      Form  of  Deed  of  Trust,  Security Agreement, Assignment of
                   Tents   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).]

        10.36      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).]

        10.37      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).]

        10.38      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).]

        10.39      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.  [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, 2000 (File No. 0-23616).]

        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      Amended and Restated Guaranty and Indemnity  Agreement  dated
                   as of July 31, 2001 by and  among Horizon  Group  Properties,
                   Inc., Horizon Group Properties, L.P., Prime  Retail, Inc. and
                   Prime  Retail, L.P.  [Incorporated  by  reference to the same
                   titled exhibit in the Company's Quarterly Report on Form 10-Q
                   dated September 30, 2001 (File No. 0-23616).]

<PAGE>
                                  Page - (40)

      Exhibit
      Number       Description

        10.42      Second  Amended and Restated Guaranty and Indemnity Agreement
                   dated  as  of  July  10, 2002  by  and  among  Horizon  Group
                   Properties,  Inc.,  Horizon  Group Properties,   L.P.,  Prime
                   Retail,  Inc.  and   Prime   Retail,  L.P.  [Incorporated  by
                   reference   to  the same  titled  exhibit  in  the  Company's
                   Quarterly  Report  on Form 10-Q dated June 30, 2002 (File No.
                   001-13301).]

        10.43      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 the same titled exhibit in the Company's Current
                   Report on Form 8-k dated June 15, 1998 (File No. 001-13301).]

        10.44      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 the  same titled exhibit in the
                   Company's Current  Report  on  Form 8-K dated August 11, 1999
                   (File No. 001-13301).]

        10.45      Seventh Amendment dated December 4, 2001 to 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  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).]

        10.46      Guaranty   Agreement  dated  July  10,  2002 by Horizon Group
                   Properties,   Inc.,  Horizon   Group   Properties,  L.P.  and
                   Prime Retail, L.P.,  collectively,   as guarantors,  in favor
                   of Beal Bank, S.S.B.  [Incorporated by reference to  the same
                   titled  exhibit in the  Company's   Quarterly  Report on Form
                   10-Q dated  September  30, 2002 (File No.  001-13301).]

        10.47      Real  Estate  Sale  Agreement,  dated January 9, 2002, by and
                   between  (i) Shasta  Outlet  Center  Limited Partnership, The
                   Prime  Outlets   at  Calhoun  Limited  Partnership,  Carolina
                   Factory  Shops  Limited  Partnership,  Latham  Factory Stores
                   Limited  Partnership,  The   Prime  Outlets  at  Lee  Limited
                   partnership,  Prime  Lee  Development Limited Partnership and
                   Buckeye  Factory  Shops  Limited  Partnership,  collectively,
                   as   sellers   and   (ii)  PWG  Capital,  LLC,  as  purchaser
                   [Incorporated  by  reference  to  the  same titled exhibit in
                   the  Company's  Current  Report  on  Form 8-K dated August 8,
                   2002).]

        10.48      First  Amendment  to  Real  Estate Sale Agreement dated March
                   27, 2002  [Incorporated  by  reference  to  the  same  titled
                   exhibit  in  the  Company's  Current Report on Form 8-K dated
                   August 8, 2002).]

        10.49      Second  Amendment  to  Real Estate Sale Agreement dated April
                   5,  2002  [Incorporated  by  reference  to  the  same  titled
                   exhibit  in  the  Company's Report  on  Form 8-K dated August
                   8, 2002).]

**      10.50      Amended   and  Restated  Promissory  Note dated  December  6,
                   2002 between  Coral  Isle Factory Shops Limited  Partnership,
                   Gulf  Coast  Factory  Shops  Limited Partnership,  Coral Isle
                   Factory Shop Limited Partnership,  Kansas  City Factory Shops
                   Limited Partnership,  Ohio Factory Shops Limited Partnership,
                   San Marcos Factory Store, LTD, Triangle Factory Store Limited
                   Partnership,  Gainesville Factory  Shops Limited Partnership,
                   Florida Keys  Factory Shops  Limited  Partnership,  The Prime
                   Outlets  at  Lebanon  Limited  Partnership,   Magnolia  Bluff
                   Factory  Shops  Limited  Partnership,  Huntley  Factory Shops
                   Limited   Partnership,    Gulfport   Factory   Shops  Limited
                   Partnership and   Defeasance  Borrowers  (solely for purposes
                   joining into Section 4.12),  collectively  as borrowers,  and
                   LaSalle Bank National Association, as Trustee for the Holders
                   of  Asset Securitization   Corporation   Commercial  Mortgage
                   Pass-Through  Certificates, Series 1996-MD VI.

**      10.51      Defeasance  Promissory  Note  dated  December 6, 2002 between
                   Castle  Rock  Factory  Shops Partnership and Loveland Factory
                   Shops   Limited   Partnership,   collectively  as  Defeasance
                   Borrowers, and LaSalle Bank  National Association, as Trustee
                   for   the   Holders   of  Asset   Securitization  Corporation
                   Commercial   Mortgage    Pass-Through   Certificates,  Series
                   1996-MD VI.

**      10.52      Form of Modification Agreement dated December 6, 2002 between
                   Prime Retail, L.P. and LaSalle Bank National Association,  as
                   Trustee  for the Holders of Asset Securitization  Corporation
                   Commercial   Mortgage   Pass-Through    Certificates,  Series
                   1996-MD VI.

<PAGE>
                                  Page - (41)

      Exhibit
      Number       Description

**      12.1       Statements Re:  Computation of Ratios

**      21.1       Subsidiaries of Prime Retail, Inc.

**      23.1       Consent of Ernst & Young LLP

**      99.1       Certification  by  Chief  Executive  Officer  pursuant  to 18
                   U.S.C.  Section  1350,  as  adopted  pursuant to Section 906
                   of the Sarbanes-Oxley Act of 2002.

**      99.2       Certification  by  Chief  Financial  Officer  pursuant  to 18
                   U.S.C.  Section 1350,  as  adopted  pursuant  to  Section 906
                   of the Sarbanes-Oxley Act of 2002.

** Filed herewith.

(b)     Reports on Form 8-K

     On December 19, 2002, we filed a Current Report on Form 8-K relating to the
completion  of two  separate  transactions  involving  the sale of three  outlet
centers for aggregate cash  consideration of $132.5 million on December 6, 2002.
The first  transaction  involved the sale of two outlet centers  (together,  the
"Colorado  Properties"  and the second  transaction  involved  the sale of Prime
Outlets of Puerto Rico and certain  adjacent  parcels of land (the  "Puerto Rico
Center").  In  connection  with the sale of  Colorado  Properties  we  partially
defeased a first mortgage and expansion loan. The filing included  unaudited pro
forma financial information pursuant to Article 11 of Regulation S-X and certain
exhibits,  including (i) the Press  Release  issued  December 6, 2002  regarding
completion of the  transactions  and (ii) the Press Release issued  December 16,
2002 announcing we had repaid a mezzanine loan in full.

     On March  5,  2003 we  filed a  Current  Report  on Form  8-K  relating  to
information furnished under Regulation FD disclosure.  The filing included as an
exhibit,  the Press Release  issued March 4, 2003  regarding  our  disclosure of
limited discussions among certain of our restricted preferred shareholders.

 (c)    Exhibits

     The list of  exhibits  filed with this  report is set forth in  response to
Item 15(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>
                                  Page - (42)

                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 28, 2003.

                                PRIME RETAIL, INC.
                                /s/ Robert A. Brvenik
                                Robert A. Brvenik
                                President, Chief Financial Officer and Treasurer

     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 28, 2003
         --------------------------------------
         Glenn D. Reschke
         Chairman of the Board and Chief Executive Officer

         /s/ Howard Amster                                        March 28, 2003
         --------------------------------------
         Howard Amster
         Director

         /s/ Kenneth A. Randall                                   March 28, 2003
         --------------------------------------
         Kenneth A. Randall
         Director

         /s/ Michael W. Reschke                                   March 28, 2003
         --------------------------------------
         Michael W. Reschke
         Director

         /s/ Sharon Sharp                                         March 28, 2003
         --------------------------------------
         Sharon Sharp
         Director

         /s/ Gary J. Skoien                                       March 28, 2003
         --------------------------------------
         Gary J. Skoien
         Director

         /s/ James R. Thompson                                    March 28, 2003
         --------------------------------------
         James R. Thompson
         Director

         /s/ Marvin S. Traub                                      March 28, 2003
         --------------------------------------
         Marvin S. Traub
         Director
<PAGE>
                                  Page - (43)

                                 CERTIFICATIONS

I, Glenn D. Reschke, certify that:

1.   I have reviewed this annual report on Form 10-K of Prime Retail, Inc;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)   designed such  disclosure  controls and  procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the  period  in which  this  annual  report  is being
     prepared;

b)   evaluated the  effectiveness  of the registrant's  disclosure  controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     annual report (the "Evaluation Date"); and

c)   presented in this annual report our conclusions  about the effectiveness of
     the disclosure  controls and  procedures  based on our evaluation as of the
     Evaluation Date;

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

a)   all  significant  deficiencies  in the  design  or  operation  of  internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and
b)   any fraud,  whether or not  material,  that  involves  management  or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

6.   The  registrant's  other  certifying  officer and I have  indicated in this
     annual report whether there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.





Date:  March 28, 2003                             /s/ Glenn D. Reschke
                                                  --------------------
                                                  Glenn D. Reschke, Chairman and
                                                  Chief Executive Officer

<PAGE>
                                  Page - (44)

                                 CERTIFICATIONS

I, Robert A. Brvenik, certify that:

1.   I have reviewed this annual report on Form 10-K of Prime
         Retail, Inc;

2.   Based on my  knowledge,  this  annual  report  does not  contain any untrue
     statement of a material fact or omit to state a material fact  necessary to
     make the statements  made, in light of the  circumstances  under which such
     statements  were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information included in this annual report,  fairly present in all material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

d)   designed such  disclosure  controls and  procedures to ensure that material
     information   relating  to  the  registrant,   including  its  consolidated
     subsidiaries,  is  made  known  to  us by  others  within  those  entities,
     particularly  during  the  period  in which  this  annual  report  is being
     prepared;

e)   evaluated the  effectiveness  of the registrant's  disclosure  controls and
     procedures  as of a date  within 90 days prior to the  filing  date of this
     annual report (the "Evaluation Date"); and

f)   presented in this annual report our conclusions  about the effectiveness of
     the disclosure  controls and  procedures  based on our evaluation as of the
     Evaluation Date;

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent  evaluation,  to the  registrant's  auditors  and the audit
     committee of  registrant's  board of directors (or persons  performing  the
     equivalent functions):

c)   all  significant  deficiencies  in the  design  or  operation  of  internal
     controls which could adversely affect the  registrant's  ability to record,
     process,  summarize and report  financial data and have  identified for the
     registrant's auditors any material weaknesses in internal controls; and

d)   any fraud,  whether or not  material,  that  involves  management  or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls; and

6.   The  registrant's  other  certifying  officer and I have  indicated in this
     annual report whether there were significant  changes in internal  controls
     or in other  factors  that could  significantly  affect  internal  controls
     subsequent  to the  date  of our  most  recent  evaluation,  including  any
     corrective  actions with regard to  significant  deficiencies  and material
     weaknesses.





Date:  March 28, 2003                      /s/ Robert A. Brvenik
                                           ---------------------
                                           Robert A. Brvenik, President,
                                           Chief Financial Officer and Treasurer

<PAGE>
                                   Page - (F-1)

                         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,  2002  and  2001,  and the  related
consolidated  statements of operations,  shareholders' equity and cash flows for
each of the three years in the period  ended  December  31,  2002.  We have also
audited the related financial  statement schedule listed in the Index at Item 15
(a).  These  financial  statements  and schedule are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements and schedule based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial  position of the Company at
December 31, 2002 and 2001, and the  consolidated  results of its operations and
its cash flows for each of the three  years in the  period  ended  December  31,
2002, in conformity with accounting  principles generally accepted in the United
States.  Also, in our opinion,  the related financial statement  schedule,  when
considered in relation to the basic consolidated financial statements,  taken as
a whole,  present fairly,  in all material  respects,  the information set forth
therein.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern. As more fully described in Note 6, the
Company's ability to refinance  maturing debt and repay a guaranteed  obligation
is dependent upon  completing  certain  capital  raising  activities by specific
dates. If the Company is unable to complete  certain capital raising  activities
by the specified dates, it may not be able to refinance  maturing debt and repay
a guaranteed  obligation.  These  conditions raise  substantial  doubt about the
Company's ability to continue as a going concern.  Management's  plans in regard
to these matters are also  described in Note 6. The financial  statements do not
include  any   adjustments  to  reflect  the  possible  future  effects  on  the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.

As discussed in Note 2 to the  consolidated  financial  statements,  in 2002 the
Company  adopted the provisions of Statement of Financial  Accounting  Standards
No. 144,  "Accounting  for  Impairment  or Disposal  of  Long-Lived  Assets." In
addition, as discussed in Note 2 to the consolidated  financial  statements,  in
2002 the  Company  changed  its  method of  accounting  for  losses on the early
extinguishment of debt.







                                                /s/ Ernst & Young LLP


Baltimore, Maryland
March 21, 2003

<PAGE>
                                   Page - (F-2)

                               PRIME RETAIL, INC.

                           Consolidated Balance Sheets

                (Amounts in thousands, except share information)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
December 31,                                                                                        2002                  2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>                   <C>
Assets
Investment in rental property:
     Land                                                                                      $ 101,546           $   148,463
     Buildings and improvements                                                                  740,024             1,208,568
     Property under development                                                                        -                 3,352
     Furniture and equipment                                                                      13,292                15,225
                                                                                               ---------           -----------
                                                                                                 854,862             1,375,608
     Accumulated depreciation                                                                   (213,604)             (258,124)
                                                                                               ---------           -----------
                                                                                                 641,258             1,117,484
Cash and cash equivalents                                                                          6,908                 7,537
Restricted cash                                                                                  107,037                37,885
Accounts receivable, net                                                                           3,049                 5,017
Deferred charges, net                                                                              3,766                11,789
Assets held for sale                                                                                   -                54,628
Investment in unconsolidated joint ventures                                                       49,889                24,539
Other assets                                                                                       6,181                 3,629
                                                                                               ---------           -----------
          Total assets                                                                         $ 818,088           $ 1,262,508
                                                                                               =========           ===========

Liabilities and Shareholders' Equity
Bonds payable, including $17,920 in default in 2002                                            $  22,495           $    31,975
Notes payable, including $41,632 in default in 2002                                              511,443               925,492
Defeased notes payable                                                                            74,764                     -
Accrued interest                                                                                   3,984                 7,643
Real estate taxes payable                                                                          3,484                 8,091
Accounts payable and other liabilities                                                            43,059                31,380
                                                                                               ---------           -----------
     Total liabilities                                                                           659,229             1,004,581

Minority interests                                                                                 1,487                 1,487

Shareholders' equity:
  Shares of preferred stock, 24,315,000 shares authorized:
     10.5% Series A Senior Cumulative Preferred Stock,
          $0.01 par value (liquidation preference of $76,367),
          2,300,000 shares issued and outstanding                                                     23                    23
     8.5% Series B Cumulative Participating Convertible
          Preferred Stock, $0.01 par value (liquidation preference
          of $247,687), 7,828,125 shares issued and outstanding                                       78                    78
  Shares of common stock, 150,000,000 shares authorized:
     Common stock, $0.01 par value, 43,577,916 shares
          issued and outstanding                                                                     436                   436
  Additional paid-in capital                                                                     709,373               709,373
  Distributions in excess of earnings                                                           (552,538)             (453,470)
                                                                                               ---------           -----------
      Total shareholders' equity                                                                 157,372               256,440
                                                                                               ---------           -----------
          Total liabilities and shareholders' equity                                           $ 818,088           $ 1,262,508
                                                                                               =========           ===========
====================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
                                   Page - (F-3)

                               PRIME RETAIL, INC.

                      Consolidated Statements of Operations

              (Amounts in thousands, except per share information)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                 2002                2001               2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                 <C>                <C>
Revenues
Base rents                                                         $   86,184          $  113,546         $  151,605
Percentage rents                                                        3,756               3,469              5,566
Tenant reimbursements                                                  48,730              54,178             70,749
Interest and other                                                     13,361              12,126             13,728
                                                                   ----------          ----------         ----------
  Total revenues                                                      152,031             183,319            241,648

Expenses
Property operating                                                     42,446              44,472             58,494
Real estate taxes                                                      12,931              15,054             17,655
Depreciation and amortization                                          34,301              45,863             57,930
Corporate general and administrative                                   14,562              14,290             21,581
Interest                                                               61,826              79,864             91,161
Other charges                                                           8,684              19,632             22,907
Provision for asset impairment                                         84,093              63,026             77,115
                                                                   ----------          ----------         ----------
  Total expenses                                                      258,843             282,201            346,843
                                                                   ----------          ----------         ----------
Loss before gain (loss) on sale of real
  estate and minority interests                                      (106,812)            (98,882)          (105,195)
Gain (loss) on sale of real estate, net                                 5,802              (1,063)           (42,648)
                                                                   ----------          ----------         ----------
Loss from continuing operations
  before minority interests                                          (101,010)            (99,945)          (147,843)
Loss allocated to minority interests                                        -                 408                738
                                                                   ----------          ----------         ----------
Loss from continuing operations                                      (101,010)            (99,537)          (147,105)
Discontinued operations, including provision for
  asset impairment of $27,757 and net gain of
  $26,152 on dispositions in 2002                                       1,942               1,489              4,653
                                                                   ----------          ----------         ----------
Net loss                                                              (99,068)            (98,048)          (142,452)
Allocations to preferred shareholders                                 (22,672)            (22,672)           (22,672)
                                                                   ----------          ----------         ----------
Net loss applicable to common shares                               $ (121,740)         $ (120,720)        $ (165,124)
                                                                   ==========          ==========         ==========

Basic and diluted earnings per common share:
Loss from continuing operations                                    $    (2.83)            $ (2.80)           $ (3.90)
Discontinued operations                                                  0.04                0.03               0.11
                                                                   ----------          ----------         ----------
  Net loss                                                         $    (2.79)            $ (2.77)           $ (3.79)
                                                                   ==========          ==========         ==========

Weighted-average common shares
  outstanding - basic and diluted                                      43,578              43,578             43,517
                                                                   ==========          ==========         ==========
====================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
                                   Page - (F-4)

                               PRIME RETAIL, INC.

                      Consolidated Statements of Cash Flows

                             (Amounts in thousands)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                               2002               2001               2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                 <C>              <C>
Operating Activities
Loss from continuing operations                                                    $ (101,010)         $ (99,537)       $ (147,105)
Adjustments to reconcile net loss to net cash
  provided by operating activities:
     Loss allocated to minority interests                                                   -               (408)             (738)
     (Gain) loss on sale of real estate, net                                           (5,802)             1,063            42,648
     Loss on early extringuishment of debt                                                525                  -             4,206
     Gain on sale of outparcel land                                                         -                  -            (2,472)
     Depreciation and amortization                                                     34,301             45,863            57,930
     Amortization of deferred financing costs                                           4,747              6,341             2,922
     Amortization of debt premiums                                                     (2,020)            (1,928)           (1,841)
     Provision for uncollectible accounts receivable                                    1,881              9,031             6,288
     Provision for asset impairment                                                    84,093             63,026            68,663
     Discontinued operations                                                           10,186             14,401            14,450
     Loss on eOutlets                                                                       -                  -            14,703
     Loss on Designer Connection                                                            -                  -             1,815
Changes in operating assets and liabilities:
     Increase in accounts receivable                                                   (1,179)            (3,092)           (4,903)
     (Increase) decrease in restricted cash                                             7,635             15,477           (28,151)
     (Increase) decrease in other assets                                               (1,410)             3,307             3,285
     Increase (decrease) in accounts payable and other liabilities                     (1,793)           (23,151)            4,272
     Increase (decrease) in real estate taxes payable                                    (150)               142            (2,145)
     Increase (decrease) in accrued interest                                             (177)             2,376            (1,377)
                                                                                   ----------          ---------        ----------
       Net cash provided by operating activities                                       29,827             32,911            32,450
                                                                                   ----------          ---------        ----------

Investing Activities
Additions to investment in rental property                                             (7,713)           (15,170)          (51,833)
Payments made for eOutlets.com                                                              -             (2,170)          (11,161)
Proceeds from repayment of notes receivable, net                                            -             14,523                 -
Contributions to investments in partnerships                                                -             (2,950)           (3,000)
Proceeds from sales of operating properties and land                                   49,461             11,362            67,089
                                                                                   ----------          ---------        ----------
       Net cash provided by investing activities                                       41,748              5,595             1,095
                                                                                   ----------          ---------        ----------

Financing Activities
Proceeds from notes payable                                                                 -             16,899           134,497
Principal repayments on notes payable                                                 (72,092)           (56,222)         (155,120)
Contributions from minority interests                                                       -                400                 -
Deferred costs                                                                           (112)              (952)          (11,359)
                                                                                   ----------          ---------        ----------
       Net cash used in financing activities                                          (72,204)           (39,875)          (31,982)
                                                                                   ----------          ---------        ----------

Increase (decrease) in cash and cash equivalents                                         (629)            (1,369)            1,563
Cash and cash equivalents at beginning of period                                        7,537              8,906             7,343
                                                                                   ----------          ---------        ----------
Cash and cash equivalents at end of period                                         $    6,908          $   7,537        $    8,906
                                                                                   ==========          =========        ==========
====================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
                                   Page - (F-5)

                               PRIME RETAIL, INC.

                Consolidated Statements of Cash Flows (continued)

                             (Amounts in thousands)



Supplemental Disclosure of Non-cash Investing and Financing Activities

     The following  assets and liabilities  were disposed in connection with the
disposition of properties during the periods indicated:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,                                                            2002                 2001                 2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>                  <C>                  <C>
  Book value of net assets disposed                                            $ 380,086            $  42,696            $ 333,906
  Notes payable paid                                                            (168,982)             (30,271)                   -
  Notes payable assumed by buyer                                                 (46,862)                   -             (206,735)
  Notes payable transferred to lender                                            (58,685)                   -                    -
  Deposits to restricted cash                                                    (79,257)                   -                    -
  Investment in unconsolidated joint ventures                                    (26,327)              (3,000)              (4,962)
  Accounts payable and other liabilities                                          17,237
  Promissory note received from buyer                                                  -                3,000              (10,000)
  Gain on sale of outparcel land (included in other income)                            -                    -               (2,472)
  Discontinued operations - net gain on disposals                                 26,152                    -                    -
  Gain (loss) on sale of real estate                                               5,802               (1,063)             (42,648)
                                                                               ---------             --------            ---------
      Cash received, net                                                       $  49,164             $ 11,362            $  67,089
                                                                               =========             ========            =========
====================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements

<PAGE>
                                   Page - (F-6)

                               PRIME RETAIL, INC.

                 Consolidated Statements of Shareholders' Equity

                (Amounts in thousands, except share information)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                            Series A         Series B
                                             Senior        Convertible                  Additional     Distributions      Total
                                           Preferred        Preferred       Common        Paid-in       in Excess of   Shareholders'
                                             Stock            Stock         Stock         Capital         Earnings        Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>           <C>         <C>              <C>             <C>
Balance, January 1, 2000                      $ 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
Net loss                                         -               -              -               -           (98,048)       (98,048)
                                              ----            ----          -----       ---------        ----------      ---------
Balance, December 31, 2001                      23              78            436         709,373          (453,470)       256,440
Net loss                                         -               -              -               -           (99,068)       (99,068)
                                              ----            ----          -----       ---------        ----------      ---------
Balance, December 31, 2002                    $ 23            $ 78          $ 436       $ 709,373        $ (552,538)     $ 157,372
                                              ====            ====          =====       =========        ==========      =========
====================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
                                   Page - (F-7)

                               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.  We are a  self-administered  and  self-managed  real  estate
investment trust ("REIT") that primarily develops,  acquires,  owns and operates
outlet centers.  As of December 31, 2002, the Company's outlet center portfolio,
including nine properties owned through unconsolidated joint ventures,  consists
of 38 properties (the "Properties") in 24 states,  which total 10,269,000 square
feet of gross leasable area ("GLA").  As a fully integrated real estate firm, we
provide accounting, finance, leasing, marketing, and management services for the
Properties. Prime Retail, L.P. (the "Operating Partnership"), a Delaware limited
partnership,  is the entity  through which we conduct  substantially  all of our
business  and  operations  and own  (either  directly  or through  subsidiaries)
substantially  all of our  assets  including  the  Properties.  We  control  the
Operating  Partnership  as its sole general  partner and are dependent  upon the
distributions  or other  payments  from the  Operating  Partnership  to meet our
financial obligations.

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

     At December 31, 2002, the Company owned 2,300,000 Series A Senior Preferred
Units of the  Operating  Partnership  (the "Series A 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 us to receive  distributions from the Operating
Partnership in an amount equal to the dividend  declared or paid with respect to
a share of our  Series A Senior  Cumulative  Preferred  Stock  ("Series A 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, 2002 is as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Number of Units
                                                                                ----------------------------------------------------
Holder                                                                                Series A           Series B            Common
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                <C>              <C>
Prime Retail, Inc.                                                                   2,300,000          7,828,125        43,577,916
Affiliates of the Prime Group and others                                                     -                  -        10,810,912
                                                                                     ---------          ---------        ----------
                                                                                     2,300,000          7,828,125        54,388,828
                                                                                     =========          =========        ==========
====================================================================================================================================
</TABLE>

     As of December 31, 2002, we had 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.

Basis of Presentation

     The accompanying  consolidated financial statements include the accounts of
the Company,  the Operating  Partnership and the  partnerships in which it has a
controlling  financial interest.  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  us 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. See Note 2 -
"Significant Accounting Policies" for additional information.

<PAGE>
                                   Page - (F-8)

     Investments  in   unconsolidated   joint  ventures  are  accounted  for  in
accordance  with 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 inter-company accounts and transactions have been eliminated in
consolidation.  Certain  amounts in prior  years have been  reclassified  to the
current  year  presentation,  which  did not have an impact  on our  results  of
operations or financial position.

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                    Principally term of related lease
        Furniture and equipment                5 years

     Rental property is generally carried at historical cost, net of accumulated
depreciation.  Our  prior  development  costs,  which  included  fees and  costs
incurred in the  development  of new  properties  or the  expansion  to existing
properties,   were  capitalized  as  incurred.   We  commence   amortization  of
capitalized  development  costs upon completion of construction  over the useful
lives of the respective  properties on a straight-line  basis.  Expenditures for
ordinary  maintenance  and  repairs  are  expensed to  operations  (included  in
property  operating  expenses in the  Consolidated  Statements of 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.

     We monitor our Properties for indicators of impairment on a periodic basis.
We  record a  provision  for  impairment  when we  believe  certain  events  and
circumstances  have  occurred  which  indicate  that the  carrying  value of our
Properties  might  have  experienced  a  decline  in value  that is  other  than
temporary  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 the carrying  value and the estimated  fair
value for assets held in the portfolio.  For assets held for sale, impairment is
measured as the  difference  between  the  carrying  value and fair value,  less
estimated  costs  to  dispose.  Fair  value is based  on  estimated  cash  flows
discounted  at a  risk-adjusted  rate  of  return.  Adverse  changes  in  market
conditions or deterioration  in the operating  results of our outlet centers and
other  rental  properties  could result in losses or an inability to recover the
current carrying value of such assets. Such potential losses or the inability to
recover the  current  carrying  value may not be  reflected  in our  Properties'
current carrying value,  thereby possibly  requiring an impairment charge in the
future.

Cash and Cash Equivalents and Restricted Cash

     We consider  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.

     We maintain our cash and cash  equivalents  and restricted cash in accounts
at various financial  institutions.  The majority of these accounts are interest
bearing. Although the combined account balances at each institution periodically
may exceed FDIC insurance coverage, and as a result, there is a concentration of
credit risk related to amounts on deposit in excess of FDIC insurance  coverage,
we believe that the risk is not significant. During the years ended December 31,
2002,  2001 and 2000,  we earned  interest  income of $482,  $1,846 and  $1,899,
respectively  (included  in  interest  and  other  income  in  the  Consolidated
Statements  of  Operations).  See  Note 4 -  "Restricted  Cash"  for  additional
information.

Accounts Receivable and Bad Debt Expense

     We regularly  review our accounts  receivable  to determine an  appropriate
amount for the allowance for doubtful accounts based upon the impact of economic
conditions on ours tenants' ability to pay, past collection  experience and such
other factors which, in our judgment,  deserve current  recognition.  In turn, a
provision for uncollectible  accounts receivable ("bad debt expense") is charged
against the allowance to maintain the allowance  level within this range. If the
financial condition of our tenants were to deteriorate,  resulting in impairment
in their ability to make payments due under their leases,  additional allowances
may be required.

<PAGE>
                                   Page - (F-9)

     Our  allowances  for  doubtful  accounts at December 31, 2002 and 2001 were
$3,093 and $12,515, respectively. During the years ended December 31, 2002, 2001
and  2000,  we  recorded  bad  debt  expense  of  $1,881,   $9,031  and  $6,288,
respectively  (included  in other  charges  in the  Consolidated  Statements  of
Operations).

     Net accounts  receivable  representing  straight-line  rents was $2,652 and
$4,524 at December 31, 2002 and 2001, respectively.

Deferred Charges

     Deferred  charges  generally  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 amortized as a component of interest  expense over the terms of
the respective loans on a basis that approximates the effective interest method.

Contingencies

     We are  subject  to  proceedings,  lawsuits,  and other  claims  related to
various  matters  (see  Note 13 - "Legal  Proceedings").  Additionally,  we have
guaranteed certain indebtedness of others (see Note 6 - "Debt"). With respect to
these  contingencies,  we assess the  likelihood  of any  adverse  judgments  or
outcomes to these  matters  and, if  appropriate,  potential  ranges of probable
losses.  A determination of the amount of reserves  required,  if any, for these
contingencies are made after careful analysis of each individual  issue.  Future
reserves  may be  required  because  of (i) new  developments  or changes to the
approach in which we deal with each matter or (ii) if unasserted claims arise.

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,  net in the  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.

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 and (iii) shares of Series B Convertible  Preferred  Stock were  converted
into shares of Common  Stock.  For the years ended  December 31, 2002,  2001 and
2000,   respectively,   the  effect  of  all  exercises  and   conversions   was
anti-dilutive and, therefore, dilutive EPS is equivalent to basic EPS.

Stock Based Compensation

     Stock based  compensation  is  accounted  for by using the  intrinsic-value
method in accordance  with Accounting  Principles  Board Opinion ("APB") No. 25,
"Accounting  for Stock  Issued to  Employees".  Under APB No.  25,  because  the
exercise  price of our stock options  equals the market price of the  underlying
stock on the date of the  grant,  no  compensation  expense  is  recognized.  As
permitted,  we have elected to adopt only the  disclosure  provisions of FAS No.
123, "Accounting for Stock-Based  Compensation." Additional compensation expense
under FAS No.  123 would  have been $53,  $161 and  $1,664  for the years  ended
December 31, 2002, 2001 and 2000,  respectively.  See Note 10 - "Stock Incentive
Plans"  for pro forma  information  on the  impact of the  fair-value  method of
accounting for stock options.

Income Taxes

     We have elected to be taxed as a REIT under Sections 856 through 860 of the
Internal  Revenue Code of 1986,  as amended.  As a REIT,  we  generally  are not
subject to federal income tax at the corporate  level on income we distribute to
our  shareholders  so long as we distribute  at least 90% of our taxable  income
(excluding  any net capital  gain) each year. If we fail to qualify as a REIT in
any  taxable  year,  we will be  subject to federal  income tax  (including  any
applicable  alternative  minimum tax) on our taxable income at regular corporate
rates.  Even if we  qualify as a REIT,  we may be  subject to certain  state and
local taxes on our income and property. We incurred $180, $201 and $197 of state
and  local  taxes  for the  years  ended  December  31,  2002,  2001  and  2000,
respectively.  We paid $88,  $417 and $235 of state and local  taxes  during the
years  ended  December  31,  2002,  2001 and  2000,  respectively.  See Note 9 -
"Shareholders'  Equity" for additional information with respect to our policy on
distributions to shareholders.

<PAGE>
                                   Page - (F-10)

Risks and Uncertainties

     Our results of operations are dependent on the overall health of the retail
industry.  Our 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 our operating results.

     Our  outlet  centers  compete  for  customers  primarily  with  traditional
shopping malls,  "off-price"  retailers and other outlet centers. The tenants of
outlet centers usually attempt to avoid direct  competition with major retailers
and their own full-price stores.  They accomplish this by locating outlet stores
only in outlet  centers at least 20 miles from the nearest  regional  mall.  For
this reason,  our outlet  centers are often  located in  relatively  undeveloped
areas and,  therefore,  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 our outlet  centers,  our outlet centers also compete with
web-based and catalogue retailers for customers.

     Because  a  number  of  our  outlet   centers  are  located  in  relatively
undeveloped   areas,   there  are  often  other   potential   sites  for  retail
opportunities near our outlet centers that may be developed by competitors.  The
existence or development of other retail venues with a more convenient  location
or the offer of lower rent may  attract  our  tenants or cause them to seek more
favorable  lease  terms at or  prior to  renewal  of their  leases  with us and,
accordingly, may affect adversely the business, revenues and sales volume of our
outlet centers.

     In addition, the success of tenants in our outlet centers which are located
in relatively  undeveloped  areas, and, thus, the success of such outlet centers
themselves,  depends on shoppers  traveling  significant  distances to shop.  If
shoppers should become less willing to travel the distances necessary to shop at
our remote outlet  centers,  the business of our tenants  would likely  decline.
Such a decline would likely cause the value, business,  revenue and sales volume
of such outlet centers to decline.

Investment in Unconsolidated Joint Ventures

     We  account  for  our  investment  in  unconsolidated   joint  ventures  in
accordance  with the equity  method of  accounting  as we  exercise  significant
influence,  but do not  control  these  entities.  In all of our  joint  venture
arrangements,  the  rights  of the  investors  are  both  protective  as well as
participating.   Therefore,   these   participating   rights  preclude  us  from
consolidating  our  investments.  Our investments are recorded  initially at our
cost  and  subsequently  adjusted  for  equity  in  earnings  (losses)  and cash
contributions  and  distributions.  See Note 7 - "Investment  in  Unconsolidated
Joint Ventures" for additional information.

Recent Accounting Pronouncements

     In October,  2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standards  ("FAS") No. 144,  "Accounting for
Impairment of Disposal of  Long-lived  Assets." FAS No. 144  supercedes  FAS No.
121, however it retains the fundamental  provisions of that statement as related
to the recognition and measurement of the impairment of long-lived  assets to be
"held  and  used."  In  addition,  FAS No.  144 (i)  provides  further  guidance
regarding the estimation of cash flows in the  performance  of a  recoverability
test, (ii) requires that a long-lived asset to be disposed of other than by sale
(e.g.,  abandoned) be classified as "held and used" until it is disposed of, and
(iii)  established more  restrictive  criteria to classify an asset as "held for
sale."  Effective  January 1, 2002,  we adopted FAS No. 144. Our adoption of FAS
No. 144 effective  January 1, 2002 did not have a material impact on our results
of operations or financial position.

     In accordance with the  requirements of FAS No. 144, we have classified the
operating  results,  including  gains and  losses  related to  disposition,  for
certain  properties  either  disposed of or  classified  as assets held for sale
during  2002  as  discontinued  operations  in the  Consolidated  Statements  of
Operations  for all periods  presented.  The  operating  results for  properties
disposed  of  before  January  1,  2002  are  not  classified  as   discontinued
operations. See Note 3 - "Property Dispositions" for additional information.

     In May 2002, the FASB issued FAS No. 145,  "Reporting Gains and Losses from
Extinguishment  of Debt",  which  rescinded FAS No. 4, FAS No. 44 and FAS No. 64
and  amended  FAS  No.  13.  FAS  No.  145   addresses   the  income   statement
classification  of gains or losses from the  extinguishment of debt and criteria
for  classification as extraordinary  items. FAS No. 145 is effective for fiscal
years beginning after May 15, 2002. We early adopted FAS No. 145 on December 31,
2002.  As a result of our  adoption  of FAS No.  145,  any  non-recurring  costs
incurred in connection with the early extinguishment of debt are classified as a
component of interest expense in the  Consolidated  Statements of Operations for
all periods presented.  Nevertheless, the adoption of FAS No. 145 did not have a
material impact on our results of operations or financial position.

<PAGE>
                                  Page - (F-11)

     In  December  2002,  the  FASB  issued   Interpretation   ("FIN")  No.  45,
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees  of  Indebtedness  of Others." FIN No. 45 elaborates on the
disclosures to be made by a guarantor in interim and annual financial statements
about the obligations under certain guarantees. FIN No. 45 also clarifies that a
guarantor  is required to  recognize,  at the  inception  of the  guarantee,  an
initial liability for the fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements of FIN No. 45 are effective for financial
statements  of interim or annual  periods  ending after  December  15, 2002.  We
adopted the disclosure provisions of FIN No. 45 effective December 31, 2002. The
initial  recognition  and  initial  measurement  provisions  of FIN  No.  45 are
applicable  on a  prospective  basis to  guarantees  issued  or  modified  after
December 31, 2002. We are in the process of determining  the impact,  if any, on
our results of  operations or financial  condition  from the adoption of FIN No.
45. See "Guarantees and Guarantees of Indebtedness of Others"  contained in Note
6 - "Debt" for additional information.

     In January  2003,  the FASB issued FIN No. 46,  "Consolidation  of Variable
Interest  Entities." FIN No. 46 clarifies the application of existing accounting
pronouncements  to certain  entities in which  equity  investors do not have the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial support from other parties. The provisions of FIN No. 46
will be immediately  effective for all variable  interests in variable  interest
entities  created  after  January  31,  2003,  and we  will  need to  apply  the
provisions of FIN No. 46 to any existing variable interests in variable interest
entities by no later than  December 31, 2004.  We do not believe that FIN No. 46
will have a significant impact on our financial statements.

Note 3 - Property Dispositions

     We  have  disposed  of  certain  properties  through  various  transactions
(including  sale,  joint  venture  arrangements,  foreclosure  and  transfer  of
ownership to the  respective  lender)  during the years ended December 31, 2002,
2001 and 2000. The following table summarizes these dispositions by year:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                          Provision
                                                                                         Reduction            Gain/Loss      for
                                  Date of                                         Sales     of         Net     on Sales/    Asset
                                Disposition     Property Type         GLA         Price    Debt     Proceeds  Disposition Impairment
------------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>             <C>                 <C>         <C>       <C>          <C>        <C>        <C>
Year 2002
Continuing Operations:
Hagerstown Center                January 2002     Outlet Center      487,000   $ 80,500  $ (57,914)   $12,113    $ 16,793   $     -
Bellport Outlet Center
 - Phases II/III                   April 2002     Outlet Center      197,000      6,500          -        522        (703)        -
Bridge Properties                   July 2002    Outlet Centers    1,304,000    118,650   (111,009)         -     (10,288)        -
                                                                   ---------   --------  ---------    -------    --------   -------
  Subtotal                                                         1,988,000    205,650   (168,923)    12,635       5,802         -
                                                                   ---------   --------  ---------    -------    --------   -------

Discontinued Operations:
Conroe Center                    January 2002     Outlet Center      282,000          -    (15,621)      (554)          -         -
Edinburgh Center                 January 2002     Outlet Center      305,000     27,000    (16,317)     9,551      (9,623)        -
Western Plaza                       June 2002  Community Center      205,000      9,500     (9,467)       688       2,121         -
Jeffersonville II                 August 2002     Outlet Center      314,000          -    (17,938)         -      17,121         -
Vero Beach                     September 2002     Outlet Center      326,000          -    (25,126)         -           -    12,200
Melrose Place                    October 2002  Community Center       27,000      2,500     (1,935)       555         990         -
Puerto Rico Center              December 2002     Outlet Center      176,000     36,500    (19,202)    13,958           -    15,557
Colorado Properties             December 2002     Outlet Center      808,000     96,000    (74,849)    12,628      15,543         -
                                                                   ---------   --------  ---------    -------    --------   -------
  Subtotal                                                         2,443,000    171,500   (180,455)    36,826      26,152    27,757
                                                                   ---------   --------  ---------    -------    --------   -------

Total                                                              4,431,000   $377,150  $(349,378)   $49,461    $ 31,954   $27,757
                                                                   =========   ========  =========    =======    ========   =======

------------------------------------------------------------------------------------------------------------------------------------
Year 2001
Northgate Plaza                 February 2001  Community Center      140,000   $  7,050  $  (5,966)   $   510    $    732   $     -
Silverthorne Center                March 2001     Outlet Center      257,000     29,000    (18,078)     8,993           -         -
New River Center                     May 2001     Outlet Center      326,000          -          -          -        (180)        -
Camarillo land                  November 2001              Land          N/A      7,150     (6,227)     1,859      (1,615)        -
                                                                   ---------   --------  ---------    -------    --------   -------
  Total                                                              723,000   $ 43,200  $ (30,271)   $11,362    $ (1,063)  $     -
                                                                   =========   ========  =========    =======    ========   =======

------------------------------------------------------------------------------------------------------------------------------------
Year 2000
Williamsburg Center             February 2000     Outlet Center      274,000   $ 59,000  $ (32,500)   $11,063    $      -   $     -
Camarillo outparcel land           March 2000    Outparcel land          N/A      4,563          -      4,623       2,472         -
Permanent Loan Properties       December 2000    Outlet Centers    1,592,000    239,500   (174,235)    51,403     (42,648)        -
                                                                   ---------   --------  ---------    -------    --------   -------
  Total                                                            1,866,000   $303,063  $(206,735)   $67,089    $(40,176)  $     -
                                                                   =========   ========  =========    =======    ========   =======
====================================================================================================================================
</TABLE>

<PAGE>
                                  Page - (F-12)

2002 Dispositions - Continuing Operations

     The  operating  results  for  certain  properties  that  were sold to joint
venture  partnerships  during  2002 and in which  we  still  have a  significant
continuing  involvement  are not  classified as  discontinued  operations in the
Consolidated  Statements of Operations.  Such properties  and/or their operating
results  through  the dates of their  respective  disposition  are  collectively
referred  to as the "2002  Joint  Venture  Properties".  The 2002 Joint  Venture
Properties  consist  of our  sales  of (i)  Prime  Outlets  at  Hagerstown  (the
"Hagerstown   Center")  and  six  outlet  centers   (collectively,   the  Bridge
Properties").   The   following   discussion   summarizes   the  terms  of  such
dispositions.

Hagerstown Center

     On January 11, 2002, we completed  the sale of the  Hagerstown  Center,  an
outlet center located in Hagerstown,  Maryland,  for aggregate  consideration of
$80,500 to an existing joint venture  partnership (the  "Prime/Estein  Venture")
between one of our affiliates and an affiliate of Estein & Associates  USA, Ltd.
("Estein"),  a real estate investment company. Our affiliate and Estein have 30%
and 70% ownership  interests,  respectively,  in the  Prime/Estein  Venture.  In
connection with the sale  transaction,  the  Prime/Estein  Venture assumed first
mortgage indebtedness of $46,862 on the Hagerstown Center (the "Hagerstown First
Mortgage");  however,  our guarantee of the Hagerstown First Mortgage remains in
place.

     The net proceeds from the sale, including the release of certain funds held
in escrow, were $12,113 after (i) a pay-down of $11,052 of mortgage indebtedness
on the Hagerstown  Center and (ii)  prorations,  closing costs and fees. The net
proceeds  from this sale were used to make a  principal  payment of $11,647 on a
mezzanine loan (the  "Mezzanine  Loan")  obtained in December 2000 from FRIT PRT
Lending LLC and Greenwich Capital Financial Products,  Inc.  (collectively,  the
"Mezzanine  Lender") in the original amount of $90,000.  See Note 6 - "Debt" for
additional information.  Under the terms of the transaction, we will continue to
manage,  market  and  lease  the  Hagerstown  Center  for a fee on behalf of the
Prime/Estein Venture.

     The operating results of the Hagerstown Center are reflected in our results
from continuing  operations through the date of disposition.  In connection with
the sale of the Hagerstown Center, we recorded a gain on the sale of real estate
of $16,793  during the first quarter of 2002. At December 31, 2001, the carrying
value of the Hagerstown Center of $54,628 was classified as assets held for sale
in the Consolidated Balance Sheet. Effective on the date of disposition, we have
accounted for our 30% ownership  interest in the Hagerstown Center in accordance
with the equity method of accounting.

     We are obligated to refinance the  Hagerstown  First  Mortgage on behalf of
the  Prime/Estein  Venture  on or before  June 1,  2004,  the date on which such
indebtedness  matures.  Additionally,  the  Prime/Estein  Venture's  cost of the
Hagerstown  First Mortgage and any refinancing of it are fixed at an annual rate
of 7.75% for a period  of 10  years.  If the  actual  cost of such  indebtedness
should exceed 7.75% at any time during the ten-year period, we will be obligated
to pay the difference to the  Prime/Estein  Venture.  If the actual cost of such
indebtedness is less than 7.75% at any time during the ten-year period, however,
the  Prime/Estein  Venture will be obligated  to pay the  difference  to us. The
actual cost of the  Hagerstown  First  Mortgage is 30-day  LIBOR plus 1.50%,  or
2.88% as of December 31, 2002.

Bellport Center II/III

     On April  19,  2002,  we  completed  the sale of  Phases  II and III of the
Bellport Outlet Center (the "Bellport Outlet Center"),  an outlet center located
in Bellport,  New York.  We had a 51%  ownership  interest in the joint  venture
partnership  that  owned  the  Bellport  Outlet  Center  and  accounted  for our
ownership  interest in  accordance  with the equity  method of  accounting.  The
Bellport Outlet Center was sold to Sunrise Station,  L.L.C., an affiliate of one
of our joint venture  partners,  for cash  consideration of $6,500.  At closing,
recourse first mortgage indebtedness of $5,500, which was scheduled to mature on
May 1, 2002,  was repaid in full.  We received  $522 of cash  proceeds  from the
sale, which were used to make a principal payment of $502 on the Mezzanine Loan.
In connection with the sale of the Bellport Outlet Center, we recorded a loss on
the sale of real estate of $703 during the second quarter of 2002.

Bridge Properties

     On July 26,  2002,  we  completed  the sale of the  Bridge  Properties  for
aggregate  consideration  of $118,650 to  affiliates  of PFP Venture  LLC, a new
joint  venture  (the "PFP  Venture")  (i) 30.4% owned by PWG Prime  Holdings LLC
("PWG"),  a third party, and (ii) 69.6% owned by FP Investment LLC ("FPI").  FPI
is a new joint venture between (i) FRIT PRT Bridge  Acquisition LLC ("FRIT"),  a
third party, and (ii) an affiliate of ours.  Through FPI, FRIT and we indirectly
had initial  ownership  interests of 51.4% and 18.2%,  respectively,  in the PFP
Venture. PWG is the managing member of the PFP Venture. FPI and PWG have certain
protective rights over the operations of the Bridge  Properties,  which are pari
passu.  The Bridge  Properties  are located in  Anderson,  California;  Calhoun,
Georgia; Gaffney, South Carolina; Latham, New York; Lee, Massachusetts and Lodi,
Ohio.

<PAGE>
                                  Page - (F-13)

     In connection  with the sale,  $111,009 of recourse  mortgage  indebtedness
(the "Bridge Loan") on the Bridge  Properties was deemed repaid in full. Our net
proceeds  of  $6,112  from the sale  were  contributed  to FPI.  FPI used  these
proceeds along with a $17,236 capital contribution from FRIT to purchase a 69.6%
ownership interest in the PFP Venture.  Financing for the PFP Venture's purchase
of the Bridge Properties was provided by GMAC Commercial Mortgage Corporation in
the form of a $90,000,  four-year,  non-recourse mortgage loan, of which $74,000
bears  interest at LIBOR plus 4.25%  (minimum of 7.00% for the first three years
and 7.25% thereafter) and $16,000 bears interest at LIBOR plus 4.50% (minimum of
7.75%).  Furthermore,  subject to  satisfaction of certain  conditions,  the PFP
Venture  may  extend the  maturity  of the  $74,000  portion of the loan for one
additional year at LIBOR plus 4.75% with the minimum interest rate continuing at
7.25%.  Under the terms of the transaction,  we will continue to manage,  market
and lease the Bridge Properties for a fee on behalf of the PFP Venture.

     FRIT, indirectly through affiliates,  was the owner of the Bridge Loan that
was deemed repaid in full in connection  with the sale of the Bridge  Properties
and was also a 50% participant in the Mezzanine  Loan,  which was repaid in full
in  December  2002.  Pursuant  to  certain  venture-related  documents,  we have
guaranteed FRIT (i) a 13% return on its initial $17,236 of invested capital, and
(ii)  the  full  return  of its  invested  capital  (the  "Mandatory  Redemption
Obligation")  in FPI by December  31, 2003.  Our  guarantee is secured by junior
security  interests  in  collateral  similar to that  previously  pledged to the
Mezzanine Lender.

     Distributions  from  the PFP  Venture  and FPI are both  made on a  monthly
basis. FPI is entitled to receive a 15% preferred return on its invested capital
of $23,348  (approximately  $3,502 on an annual basis) in the PFP Venture.  Then
PWG is entitled to receive a 15%  preferred  return on its  invested  capital of
$10,200.  From FPI's preferred return, FRIT first receives its 13% return on its
invested  capital with the remainder (2% return on FRIT's  invested  capital and
15% on our  invested  capital)  applied  towards  the  payment of the  Mandatory
Redemption Obligation. Upon satisfaction of the Mandatory Redemption Obligation,
we will be entitled to FPI's  preferred  return  until such time as we have been
repaid in full our invested capital,  together with a 13% return on our invested
capital.  Thereafter,  FRIT and we will  share  any  cash  flow due to FPI on an
approximate equal basis.

     Because we have guaranteed the Mandatory Redemption  Obligation to FRIT and
FRIT has no risk of loss with respect to the Bridge Properties, we have included
FRIT's  initial  investment  in FPI as part of our  total  investment  in PFP of
$23,348 ($17,236 initial Mandatory Redemption Obligation plus $6,112 contributed
capital). We have also recorded the initial Mandatory Redemption Obligation as a
corresponding  liability.  Although we have not  received  any cash from the PFP
Venture,  our Mandatory  Redemption  Obligation has been reduced monthly for the
excess between FPI's 15% per annum preferred  return from PFP Venture and FRIT's
13% per  annum  guaranteed  return.  As of  December  31,  2002,  the  remaining
Mandatory  Redemption  Obligation was $16,667  (included in accounts payable and
other liabilities in the Consolidated Balance Sheet).

     The operating results of the Bridge Properties are reflected in our results
from continuing  operations through the date of disposition.  In connection with
the sale of the Bridge Properties, we recorded a loss on the sale of real estate
of  $10,288  during  the  second  quarter  of 2002.  This loss  represented  the
write-down  of our carrying  value of the Bridge  Properties to their fair value
less  estimated  costs to  dispose,  based on the  terms of the sale  agreement.
Because  PWG is the  managing  member of the PFP Venture and because of the pari
passu  nature  of the  protective  rights of FPI and PWG,  we are not  deemed in
control  of the  PFP  Venture.  Accordingly,  we  commenced  accounting  for our
indirect  ownership  interest in the PFP Venture in  accordance  with the equity
method of accounting  effective on the date of disposition.  We record our share
of the  operations  of  the  Bridge  Properties  using  an  assumed  book  value
liquidation model because both FPI and the PFP Venture have specific allocations
for distribution.

     For the  years  ended  December  31,  2002,  2001 and  2000,  respectively,
combined revenues were $14,414, $37,466 and $37,200,  respectively, and combined
expenses were $17,003,  $42,456 and $36,925,  respectively,  for the  Hagerstown
Center and the Bridge  Properties  as reflected  in our results from  continuing
operations  through their respective  dates of disposition.  For the years ended
December 31, 2002, 2001 and 2000, our equity in losses (included in interest and
other income in the  Consolidated  Statements  of  Operations)  for the Bellport
Outlet Center were $378, $661 and $398, respectively.

2002 Dispositions - Discontinued Operations

     We have  classified  the  operating  results,  including  gains and  losses
related to disposition,  for certain properties either disposed of or classified
as  assets  held  for  sale  during  2002  as  discontinued  operations  in  the
Consolidated  Statements of Operations for all periods presented.  The following
discussion summarizes the terms of such dispositions.

  Conroe Center

     During 2001,  certain of our  subsidiaries  suspended  regularly  scheduled
monthly debt service  payments on two  non-recourse  mortgage  loans held by New
York Life  Insurance  Company  ("New York Life") at the time of the  suspension.
These non-recourse mortgage loans were cross-defaulted and  cross-collateralized
by Prime Outlets at Conroe (the "Conroe Center"),  located in Conroe, Texas, and
Prime Outlets at Jeffersonville II (the "Jeffersonville II Center"),  located in
Jeffersonville, Ohio.

<PAGE>
                                  Page - (F-14)

     Effective  January 1, 2002,  New York Life  foreclosed on the Conroe Center
and its related assets and liabilities,  including $554 of cash and our carrying
value of the  indebtedness  of $15,621  (principal  outstanding  of $15,467  and
unamortized  debt premium of $154),  were  transferred  from our subsidiary that
owned the Conroe Center to New York Life.  The  foreclosure of the Conroe Center
did not have a  material  impact  on our  results  of  operations  or  financial
condition  because  during 2001 all excess cash flow from the  operations of the
Conroe Center was utilized for debt service on the  non-recourse  mortgage loan.
See "Jeffersonville II Center" below for additional information.

     The operating  results of the Conroe Center are classified as  discontinued
operations in the  Consolidated  Statements  of  Operations  through the date of
disposition  for  all  periods  presented.  No  gain or  loss  was  recorded  in
connection with the foreclosure of the Conroe Center.

Edinburgh Center

     On April 1, 2002, we completed the sale of Prime Outlets at Edinburgh  (the
"Edinburgh  Center"),  an  outlet  center  located  in  Edinburgh,  Indiana  and
additional undeveloped land. The Edinburgh Center was sold to CPG Partners, L.P.
for cash  consideration  of $27,000.  The net cash  proceeds  from the sale were
$9,551,  after (i)  repayment  in full of $16,317  of  existing  first  mortgage
indebtedness  on the  Edinburgh  Center and (ii)  prorations,  closing costs and
fees.  We used these net  proceeds to make a principal  payment of $9,178 on the
Mezzanine Loan.

     The  operating  results  of  the  Edinburgh  Center  through  the  date  of
disposition  are  classified  as  discontinued  operations  in the  Consolidated
Statements of Operations  for all periods.  During the first quarter of 2002, we
recorded  a loss  on the  sale  of real  estate  of  $9,623  (also  included  in
discontinued  operations)  representing  the write-down of our carrying value of
the  Edinburgh  Center to its  estimated  fair  value  less  estimated  costs to
dispose, based on the terms of the sale agreement.

Western Plaza

     On June 17,  2002,  we  completed  the sale of the Shops at  Western  Plaza
("Western Plaza"), a community center located in Knoxville,  Tennessee.  Western
Plaza was sold to WP General  Partnership for cash  consideration of $9,500. The
net proceeds  from the sale were $688,  after (i)  repayment of $9,467 (of which
$2,467  was  scheduled  to mature on  October  31,  2002) of  existing  recourse
mortgage indebtedness on Western Plaza, (ii) prorations,  closing costs and fees
and (iii) release of certain  escrowed funds. We used these net proceeds to make
a principal payment of $661 on the Mezzanine Loan.

     The operating  results of Western Plaza through the date of disposition are
classified  as  discontinued   operations  in  the  Consolidated  Statements  of
Operations for all periods.  In connection  with the sale of Western  Plaza,  we
recorded  a gain  on the  sale  of real  estate  of  $2,121  (also  included  in
discontinued operations) during the second quarter of 2002.

Jeffersonville II Center

     Effective   July  18,  2002,  New  York  Life  sold  its  interest  in  the
Jeffersonville  II Center loan. On August 13, 2002, we transferred our ownership
interest  in the  Jeffersonville  II Center to New York Life's  successor.  As a
result of the  transfer  of our  ownership  interest  in the  Jeffersonville  II
Center,  we recorded a non-recurring  gain of $17,121  (included in discontinued
operations)  during  the third  quarter  of 2002,  representing  the  difference
between  our  carrying  value of the  Jeffersonville  II Center and its  related
assets and  liabilities,  including our carrying  value of the  indebtedness  of
$17,938 (principal outstanding of $17,768 and unamortized debt premium of $170),
as of the date of  transfer.  The  transfer  of our  ownership  interest  in the
Jeffersonville  II  Center  did not have a  material  impact on our  results  of
operations or financial  condition  because during 2001 and through the transfer
date in 2002, all excess cash flow from the operations of the  Jeffersonville II
Center was utilized for debt service on the non-recourse mortgage loan.

     The operating  results of the  Jeffersonville  II Center are  classified as
discontinued operations in the Consolidated Statements of Operations through the
date of disposition  for all periods  presented.  See "Conroe  Center" above for
additional information.

Vero Beach Center

     During  August of 2002,  certain of our  subsidiaries  suspended  regularly
scheduled monthly debt service payments on two non-recourse mortgage loans which
were  cross-collateralized  by Prime  Outlets at Vero  Beach  (the  "Vero  Beach
Center"),  located in Vero Beach,  Florida,  and Prime  Outlets at Woodbury (the
"Woodbury  Center"),  located in Woodbury,  Minnesota  (collectively,  the "John
Hancock  Properties").  These  non-recourse  mortgage  loans  were  held by John
Hancock Life Insurance Company ("John Hancock").

<PAGE>
                                  Page - (F-15)

     During  the second  quarter of 2002,  we  incurred  a  provision  for asset
impairment  of $12,200 to adjust our carrying  value of the Vero Beach Center to
its  estimated  fair value in  accordance  with the  provisions  of FAS No. 144.
Effective  September 9, 2002,  John Hancock  foreclosed on the Vero Beach Center
and its related  assets and  liabilities,  including  our carrying  value of the
indebtedness of $25,126  (principal  outstanding of $24,497 and unamortized debt
premium  of  $629),  were  transferred  to John  Hancock.  Additionally,  we are
currently  negotiating  a transfer of our  ownership  interest  in the  Woodbury
Center to John  Hancock.  Foreclosure  on the Vero Beach Center did not, and the
expected  transfer  of our  ownership  interest in the  Woodbury  Center is not,
expected to have a material  impact on our results of  operations  or  financial
condition  because  during 2002, all excess cash flow from the operations of the
John Hancock  Properties  was  utilized  for debt service on their  non-recourse
mortgage  loans.  The carrying  value of the  Woodbury  Center was $15,736 as of
December  31,  2002.  Such  value  is  exceeded  by our  carrying  value  of the
associated  indebtedness  of  $16,713  (principal  outstanding  of  $16,331  and
unamortized  debt  premium  of  $382) as of  December  31,  2002.  If we were to
transfer our ownership interest in the Woodbury Center to John Hancock, we would
record a non-recurring gain for the difference between the carrying value of the
Woodbury  Center  and its  related  net  assets  and the  carrying  value of the
indebtedness as of the date of transfer.

     The  operating   results  of  the  Vero  Beach  Center  are  classified  as
discontinued operations in the Consolidated Statements of Operations through the
date of disposition for all periods.  No gain or loss was recorded in connection
with  the  foreclosure  of the  Vero  Beach  Center.  See  Note 6 -  "Debt"  for
additional information.

Melrose Place

     On October 30, 2002,  we completed the sale of Melrose  Place,  a community
center located in Knoxville,  Tennessee. Melrose Place was sold to Melrose Place
Tennessee General Partnership for cash consideration of $2,500. The net proceeds
from the sale were $555,  after (i)  repayment  of $1,935 of  existing  recourse
mortgage indebtedness on Melrose Place, (ii) prorations,  closing costs and fees
and (iii) release of certain  escrowed funds. We used these net proceeds to make
a principal payment of $533 on the Mezzanine Loan.

     The  operating  results of Melrose  Place are  classified  as  discontinued
operations  in  the  Consolidated  Statements  of  Operations  for  all  periods
presented.  In  connection  with the sale of Melrose,  we recorded a gain on the
sale of real estate of $990 (also included in  discontinued  operations)  during
the fourth quarter of 2002.

Puerto Rico Center

     On December 6, 2002,  we completed  the sale of (i) Prime Outlets of Puerto
Rico,  an outlet  center  located in  Barceloneta,  Puerto Rico and (ii) certain
adjacent   parcels  of  land  being   developed   for   non-outlet   retail  use
(collectively,  the "Puerto Rico Center"). The Puerto Rico Center was sold to PR
Barceloneta,  LLC for cash  consideration of $36,500.  The net proceeds from the
sale were  $13,958,  after (i) repayment of $19,202 of existing  first  mortgage
indebtedness  on the Puerto Rico Center,  (ii)  pro-rations,  closing  costs and
fees,  (iii)  establishment  of certain  escrows at closing and (iv)  release of
certain  escrowed funds. We used these net proceeds to make a principal  payment
of $12,637 on the Mezzanine  Loan. At the closing of the sale of the Puerto Rico
Center,  we were  required to fund $2,800 into an escrow  account  which will be
returned  to us only upon  satisfaction  of  certain  conditions  no later  than
December 31, 2004. The escrow account is included in restricted cash (see Note 4
-  "Restricted  Cash") and an  offsetting  deferred  liability  is  included  in
accounts payable and other  liabilities in the Consolidated  Balance Sheet as of
December  31,  2002.  Under the terms of the  transaction,  we will  continue to
manage,  market  and  lease the  Puerto  Rico  Center  for a fee on behalf of PR
Barceloneta, LLC.

     The  operating  results  of the  Puerto  Rico  Center  through  the date of
disposition  are  classified  as  discontinued  operations  in the  Consolidated
Statements of Operations  for all periods.  During the third quarter of 2002, we
recorded  an  impairment   loss  of  $15,557  (also  included  in   discontinued
operations) representing the write-down of our carrying value of the Puerto Rico
Center to its fair value less estimated costs to sell, based on the terms of the
sale agreement.

Colorado Properties

     On December 6, 2002, we completed the sale of two outlet centers (together,
the  "Colorado  Properties")  to TGS (U.S.)  Realty,  Inc.  for  aggregate  cash
consideration  of $96,000.  The Colorado  Properties are located in Castle Rock,
Colorado and Loveland,  Colorado. The net proceeds from the sale of the Colorado
Properties  were $12,628,  after (i) required  defeasance of $74,849 of mortgage
indebtedness  and the costs related to such  defeasance  (see Note 6 - "Debt for
additional information),  (ii) prorations,  closing costs and fees and (iii) the
release  of  certain  escrowed  funds.  We used  these  net  proceeds  to make a
principal payment of $10,309 on the Mezzanine Loan.

     The  operating  results  of the  Colorado  Properties  through  the date of
disposition  are  classified  as  discontinued  operations  in the  Consolidated
Statements of Operations for all periods presented.  In connection with the sale
of the  Colorado  Properties,  we  recorded a gain on the sale of real estate of
$15,543 (also included in discontinued  operations) during the fourth quarter of
2002.

<PAGE>
                                  Page - (F-16)

     The following  summary  presents the operating  results of those properties
disposed of during 2002 whose results are classified as discontinued  operations
in the Consolidated Statements of Operations for all periods:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,                                                  2002                2001               2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                 <C>                <C>
Revenues
Base rents                                                           $ 17,695            $ 27,570           $ 27,225
Percentage rents                                                          639                 751                803
Tenant reimbursements                                                   9,574              13,145             12,601
Interest and other                                                        991               1,295              1,073
                                                                     --------            --------           --------
  Total revenues                                                       28,899              42,761             41,702

Expenses
Property operating                                                      7,277               9,979             10,043
Real estate taxes                                                       3,131               4,229              4,121
Depreciation and amortization                                           5,437              11,055              9,626
Interest                                                                8,954              12,995             11,279
Provision for asset impairment                                         27,757                   -                  -
Other charges                                                             553               3,014              1,980
                                                                     --------            --------           --------
  Total expenses                                                       53,109              41,272             37,049
                                                                     --------            --------           --------
Income (loss) before gain                                             (24,210)              1,489              4,653
  on sale of real estate
Gain on sale of real estate, net                                       26,152                   -                  -
                                                                     --------            --------           --------
Discontinued operations                                              $  1,942            $  1,489           $  4,653
                                                                     ========            ========           ========
====================================================================================================================================
</TABLE>

 2001 Sales Transactions

     The  operating  results  for  properties  disposed  of during  2001 are not
classified  as  discontinued   operations  in  the  Consolidated  Statements  of
Operations.  Such properties and/or their operating results through the dates of
their respective  disposition are collectively referred to as the "2001 Property
Dispositions".   The  following   discussion   summarizes   the  terms  of  such
dispositions.

     On February 2, 2001, we sold Northgate Plaza, a community center located in
Lombard,  Illinois to Arbor  Northgate,  Inc.  for  aggregate  consideration  of
$7,050.  After the repayment of mortgage  indebtedness of $5,966 and prorations,
closing  costs and fees,  the net proceeds  from the  Northgate  Plaza sale were
$510.  On  March  16,  2001,  we  sold  Prime  Outlets  at   Silverthorne   (the
"Silverthorne  Center"), an outlet center located in Silverthorne,  Colorado, to
Silverthorne Factory Stores, LLC for aggregate consideration of $29,000. The net
proceeds  from  the sale of the  Silverthorne  Center  were  $8,993,  after  the
repayment  of  certain  mortgage  indebtedness  (see  below) of $18,078 on Prime
Outlets at Lebanon (the  "Lebanon  Center") and  prorations,  closing  costs and
fees. The net proceeds from these sales were used to prepay an aggregate  $9,137
of principal  outstanding  under the Mezzanine  Loan.  In connection  with these
sales,  we recorded an aggregate  gain on the sale of real estate of $732 during
the first  quarter  of 2001.  The  operating  results  of these  properties  are
included  in  our  results  of  operations   through  the  respective  dates  of
disposition.

     Prior to the sale of the Silverthorne  Center, it was one of the properties
securing our Mega Deal Loan. In conjunction with the closing of the Silverthorne
Center,  we substituted  the Lebanon Center for the  Silverthorne  Center in the
cross-collateralized  asset pool  securing  the Mega Deal Loan  pursuant  to the
collateral   substitution   provisions  contained  in  the  loan  agreement.  In
conjunction  with adding the Lebanon  Center as security for the Mega Deal Loan,
we repaid certain  mortgage  indebtedness  on the Lebanon Center of $18,078 (see
above).

     On May 8, 2001,  Prime  Outlets at New River (the "New River  Center"),  an
outlet  center  located in New River,  Arizona,  was sold  through  foreclosure.
Affiliates  of  Fru-Con  Development  Corporation  and us  each  own  50% of the
partnership,  which owned the New River  Center.  We accounted for our ownership
interest  in the New  River  Center  in  accordance  with the  equity  method of
accounting  through  the  date of  foreclosure  sale.  In  connection  with  the
foreclosure sale of the New River Center, we recorded a loss on the sale of real
estate of $180 during the second quarter of 2001.

     On November 27, 2001, we sold certain land located in Camarillo, California
for  aggregate  consideration  of $7,150.  The net cash  proceeds from the sale,
including  the release of certain funds held in escrow,  were $1,859,  after the
repayment of certain mortgage indebtedness of $6,227 and closing costs and fees.
The net  proceeds  from  this sale  were  used to  prepay  $1,787  of  principal
outstanding  under the Mezzanine Loan. In connection with this sale, we recorded
a loss on the sale of real estate of $1,615 during the fourth quarter of 2001.

<PAGE>
                                  Page - (F-17)

     For the years  ended  December  31, 2001 and 2000,  respectively,  combined
revenues were $1,551 and $6,354,  respectively,  and combined expenses were $982
and $27,303 (including provision for asset impairment of $20,606),  respectively
for Northgate Plaza and the Silverthorne Center as reflected in our results from
continuing  operations  through their respective  dates of disposition.  For the
years  ended  December  31,  2001 and 2000,  our equity in losses  (included  in
interest and other income in the Consolidated  Statements of Operations) for the
New River Center were $181 and $446, respectively.

2000 Sales Transactions

     The  operating  results  for  properties  disposed  of during  2000 are not
classified  as  discontinued   operations  in  the  Consolidated  Statements  of
Operations. The following discussion summarizes the terms of such dispositions.

     On  February  23,  2000,   we  completed  the  sale  of  Prime  Outlets  at
Williamsburg  (the  "Williamsburg  Center")  to  the  Prime/Estein  Venture  for
aggregate  consideration  of  $59,000,  including  the  assumption  of  mortgage
indebtedness of $32,500. In connection with the sale of the Williamsburg Center,
we received (i) cash proceeds of $11,063,  net of prorations,  closing costs and
fees, and (ii) a promissory note in the amount of $10,000 from the  Prime/Estein
Venture (of which  Estein's  obligation  was  $7,000).  In  connection  with our
refinancing of the mortgage  indebtedness on the Williamsburg  Center in October
2001,  the  promissory  note was deemed repaid in full (we received  $7,000 from
Estein and our equity in the  Prime/Estein  Venture  was  increased  by $3,000).
Effective  on the  date of  disposition,  we have  accounted  for our  ownership
interest in the  Williamsburg  Center in  accordance  with the equity  method of
accounting.  See Note 6 - "Debt" for additional information.  Under the terms of
the transaction,  we will continue to manage,  market and lease the Williamsburg
Center for a fee on behalf of the Prime/Estein Venture.

     During March 2000,  we completed  the sale of an outparcel  land located in
Camarillo,  California  for  aggregate  consideration  of  $4,563.  The net cash
proceeds  from the sale,  including the release of certain funds held in escrow,
were $4,623,  after closing  costs and fees.  In  connection  with this sale, we
recorded a gain on the sale of  outparcel  land  (included in interest and other
income in the Consolidated  Statements of Operations) of $2,472 during the first
quarter of 2000.

     On December 22, 2000,  we  completed  the sale of four outlet  centers 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,  we  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 our results of operations  through the
date of disposition.

     For the year ended  December 31, 2000,  combined  revenues were $40,813 and
combined expenses were $34,609, respectively for the Williamsburg Center and the
Permanent Loan Properties as reflected in our results from continuing operations
through their respective dates of disposition.

Note 4 - Restricted Cash

     As of December 31, 2002 and 2001,  $107,037 and $37,885,  respectively,  of
cash and cash  equivalents  were  placed  in  various  escrows  and,  therefore,
classified as restricted cash in the Consolidated Balance Sheet. Restricted cash
as of December  31, 2002  includes  $79,042 of US  Treasury  Securities  held in
escrow  for  debt  service  associated  with our  defeased  notes  payable  (see
"Defeased   Notes  Payable"   contained  in  Note  6  -  "Debt"  for  additional
information).  The remainder of restricted cash generally consists of (i) lender
escrows for the payment of debt service, real estate taxes,  insurance,  capital
expenditures  and  certain  operating  expenses  and  (ii)  escrows  for  tenant
marketing  contributions.  Restricted  cash also (i) includes a cash  collateral
account  of $1,925  and  $2,825  (10% of the  original  issuance  amount)  as of
December  31, 2002 and 2001,  respectively,  for certain  fixed rate  tax-exempt
revenue bonds (see Note 6 - "Debt" for additional information) and (ii) a $2,800
escrow as of  December  31,  2002  related to our sale of the Puerto Rico Center
(see "Note 3 - "Property Dispositions" for additional information).

<PAGE>
                                  Page - (F-18)

Note 5 - Deferred Charges

        Deferred charges were as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
December 31,                                                                                              2002            2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                     <C>             <C>
Leasing commissions                                                                                     $  7,031        $  9,590
Financing costs                                                                                           11,526          27,489
                                                                                                        --------        --------
                                                                                                          18,557          37,079
Accumulated amortization                                                                                 (14,791)        (25,290)
                                                                                                        --------        --------
                                                                                                        $  3,766        $ 11,789
                                                                                                        ========        ========
====================================================================================================================================
</TABLE>

Note 6 - Debt

Bonds Payable

     Bonds payable, consisting of tax-exempt revenue bonds and Urban Development
Action Grant ("UDAG") loans, were as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
December 31,                                                                                                2002            2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                       <C>             <C>
Chattanooga Bonds, 7%, monthly interest and sinking fund payments, due December 15, 2012,
  collateralized by properties in Chattanooga, TN (In Default)                                            $ 17,920        $ 18,390

UDAG loans, 6%, monthly principal and interest payments, due August 2016 to September 2019,
  collateralized by properties in Chattanooga, TN                                                            4,575           4,650

Knoxville Bonds, 6.88%, monthly interest and sinking fund payments, due December 1, 2014,
  collateralized by properties in Knoxville, TN                                                                  -           8,935
                                                                                                          --------        --------
                                                                                                          $ 22,495        $ 31,975
                                                                                                          ========        ========
====================================================================================================================================
</TABLE>

     In 1999, we refinanced  $28,250 of variable-rate,  tax-exempt revenue bonds
by issuing an aggregate of $28,250 of fixed rate  tax-exempt  revenue bonds (the
"Fixed  Rate  Bonds").  The Fixed Rate Bonds  consisted  of (i) $19,250 of bonds
collateralized by properties located in Chattanooga, Tennessee (the "Chattanooga
Bonds") and $9,000 of bonds  collateralized by properties  located in Knoxville,
Tennessee (the "Knoxville  Bonds").  The Chattanooga  Bonds (i) bear interest at
7%, (ii) require  semi-annual  interest payments,  (iii) require monthly sinking
fund  payments and (iv) mature on December 15, 2012.  The  Knoxville  Bonds were
repaid in full during 2002 in connection  with the sales of the Shops at Western
Plaza  and  Melrose  Place  in June  and  October,  respectively  (see  Note 3 -
"Property  Dispositions" for additional  information.  The Chattanooga Bonds are
redeemable by us  commencing  in December  2006 at 102% of the then  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 then outstanding principal balance. Additionally, we are required to
maintain  an  amount  equal  to 10%  of the  original  issuance  amounts  of the
Chattanooga  Bonds in escrow  (see  Note 4 -  "Restricted  Cash" for  additional
information).  Fixed Rate Bonds of $470 and $480 were  redeemed from the sinking
fund during the years ended December 31, 2002 and 2001, respectively.

     The Chattanooga  Bonds contain (i) certain  covenants,  including a minimum
debt-service  coverage ratio financial  covenant (the "Financial  Covenant") and
(ii)  cross-default  provisions  with  respect to  certain  of our other  credit
agreements. Based on the operations of the collateral properties, we were not in
compliance with the Financial Covenant for the quarters ended June 30, September
30 and December  31, 2002.  In the event of  non-compliance  with the  Financial
Covenant or default,  the holders of the Chattanooga  Bonds (the  "Bondholders")
have the  ability  to put such  obligations  to us at a price  equal to par plus
accrued  interest.  On January  31,  2003,  we entered  into an  agreement  (the
"Forbearance  Agreement")  with  the  Bondholders.   The  Forbearance  Agreement
provides amendments to the underlying loan and other agreements that allow us to
be in  compliance  with various  financial  covenants,  including  the Financial
Covenant.  So  long  as we  continue  to  comply  with  the  provisions  of  the
Forbearance  Agreement and are not otherwise in default of the  underlying  loan
and other documents through December 31, 2004, the revised  financial  covenants
will govern.  Additionally,  certain  quarterly tested  financial  covenants and
other  covenants  become  effective June 30, 2004.  Pursuant to the terms of the
Forbearance Agreement, we were required to fund $1,000 into an escrow account to
be used  for  conversion  of  certain  of the  retail  space  in the  collateral
properties  to office  space and agreed that an event of default with respect to
the other debt  obligations  related to the  property  would also  constitute  a
default under the Chattanooga  Bonds. We funded this required escrow in February
2003.

<PAGE>
                                  Page - (F-19)

Notes Payable

        Notes payable consisted of the following:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
December 31,                                                                                                   2002           2001
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                         <C>            <C>
Mega Deal Loan, 7.782%, monthly principal and interest of $2010, due
  November 11, 2003, collateralized by 13 properties located throughout the United States                   $ 263,793      $ 342,629

Mortgage, 6.927% effective rate, monthly principal and interest of $565, due October 11, 2006,
  collateralized by four properties located throughout the United States                                       71,326         72,954

Mortgage, 6.927% effective rate, monthly principal and interest of $527, due March 11, 2006,
  collateralized by four properties located throughout the United States                                       61,621         63,521

Mortgage, 7.60%, monthly principal and interest of $450, due May 10, 2009, collateralized by
  property located in Niagara Falls, NY                                                                        60,805         61,488

Mortgage, 8.35%, monthly principal and interest of $215, due June 11, 2007,  collateralized by
  three properties located throughout the United States (In Default)                                           24,919         25,327

Mortgage, 6.95% effective rate, monthly principal and interest of $140, due November 1, 2005,
  collateralized by properties located in Vero Beach, FL (Foreclosed in September 2002) and
  Woodbury, MN (In Default)                                                                                    16,713         42,652

Mortgage, 6.95% effective rate, monthly principal and interest of $81, due November 1, 2005,
  collateralized by property located in Perryville, MD                                                          9,274          9,593

Other Notes Payable                                                                                             2,992          2,992

Mezzanine Loan, LIBOR plus 9.50% (minimum of 14.50%) through December 31, 2001
  (14.50% at December 31, 2001), LIBOR plus 9.75% (minimum of 14.75%) thereafter, monthly
  principal and interest payments, due September 30, 2003, collateralized by pledges of equity
  interests in certain properties                                                                                   -         62,079

Construction Mortgage Loan, LIBOR plus 1.50% (3.62% at December 31, 2001), monthly
  interest-only payments through May 31, 2002, monthly principal and interest thereafter, due
  June 1, 2004, collateralized by property located in Hagerstown, MD                                                -         49,062

Mortgage, 6.915% effective rate, monthly principal and interest of $357, due June 10, 2002,
  collateralized by properties located in Conroe, TX and Jeffersonville, OH                                         -         33,559

Bridge Loan, 13%, monthly interest plus principal of the greater of $50 or 50% of excess cash flow,
  due December 31, 2003, collateralized by six properties located throughout the United States                      -        111,375

Puerto Rico First Mortgage Loan, LIBOR plus 3.50% (5.64% at December 31, 2001), monthly
  interest plus (i) principal based on a 25-year amortization schedule at 9% through January 1, 2002
  and (ii) principal based on a 15-year amortization schedule at 9% thereafter, due December 31, 2003,
  collateralized by property located in Barceloneta, Puerto Rico                                                    -         19,817

Edinburgh First Mortgage Loan, LIBOR plus 3.50% (minimum of 8.00%) (8.00% at December 31, 2001),
  monthly principal and interest of $159, due July 1, 2004, collateralized by property located in
  Edinburgh, IN                                                                                                     -         16,456

Hagerstown Second Mortgage Loan, LIBOR plus 2.50% (4.62% at December 31, 2001), monthly
  interest-only payments through June 30, 2001, monthly principal of $164 plus interest thereafter,
  due June 1, 2004, collateralized by property located in Hagerstown, MD                                            -          9,016

Mortgage, 7.50%, monthly principal and interest of $29, due April 30, 2002, collateralized by
  property located in Knoxville, TN                                                                                 -          2,972
                                                                                                            ---------      ---------
                                                                                                            $ 511,443      $ 925,492
                                                                                                            =========      =========
====================================================================================================================================
</TABLE>

     Notes payable  included  unamortized debt premiums of $7,955 and $11,051 in
the aggregate at December 31, 2002 and 2001, respectively. Our debt premiums are
being  amortized  over the terms of the related debt  instruments  in accordance
with the effective  interest method.  Amortization of debt premiums (included in
interest expense in the Statements of Operations) was $2,020,  $1,928 and $1,841
for the years ended December 31, 2002, 2001 and 2000, respectively.

Defaults on Certain Non-recourse Mortgage Indebtedness

     During 2001,  certain of our  subsidiaries  suspended  regularly  scheduled
monthly  debt  service  payments  on  non-recourse  mortgage  loans  which  were
cross-collateralized  by the  Jeffersonville II Center and the Conroe Center. At
the time of suspension,  these non-recourse mortgage loans were held by New York
Life.  Effective January 1, 2002, New York Life foreclosed on the Conroe Center.
Effective July 18, 2002,  New York Life sold its interest in the  Jeffersonville
II Center loan. On August 13, 2002, we transferred our ownership interest in the
Jeffersonville  II Center to New York Life's  successor.  See Note 3 - "Property
Dispositions" for additional information.

<PAGE>
                                  Page - (F-20)

     During  August  2002,  certain  of  our  subsidiaries  suspended  regularly
scheduled  monthly debt service  payments on  non-recourse  mortgage loans which
were  cross-collateralized  by the Vero Beach  Center and the  Woodbury  Center.
These non-recourse mortgage loans were held by John Hancock. Effective September
9, 2002, John Hancock foreclosed on the Vero Beach Center. Additionally,  we are
currently  negotiating  a transfer of our  ownership  interest  in the  Woodbury
Center to John Hancock.  The aggregate carrying value of the Woodbury Center was
$15,736 as of December  31,  2002.  Such  amount is  exceeded  by the  aggregate
carrying  value of the  non-recourse  mortgage  loan of  $16,713,  including  an
unamortized  debt premium of $382, as of December 31, 2002. Upon the transfer of
the Woodbury Center to John Hancock,  we expect to record a  non-recurring  gain
for the  difference  between the carrying  value of the property and its related
net assets and the outstanding loan balance and related liabilities.  See Note 3
- "Property Dispositions" for additional information.

     In December 2002, we notified the servicer of certain non-recourse mortgage
loans  (cross-collateralized  by Prime  Outlets at Bend,  Prime  Outlets at Post
Falls and Prime Outlets at Sedona) totaling $24,919 as of December 31, 2002 that
the net cash flow from the  properties  securing the loans was  insufficient  to
fully pay the  required  monthly  debt  service.  At that  time,  certain of our
subsidiaries  suspended the regularly  scheduled  monthly debt service payments.
Subsequent  to our  notification  to the servicer,  we have been  remitting on a
monthly basis all available cash flow from the  properties,  after a reserve for
monthly operating expenses,  as partial payment of the debt service. The failure
to pay the full amount due constitutes a default under the loan agreements which
allows  the  lender to  accelerate  the loan and to  exercise  various  remedies
contained in the loan  agreements,  including  application of escrow balances to
delinquent  payments  and,  ultimately,  foreclosure  on  the  properties  which
collateralize  the loans. The lender has notified us that it has accelerated the
loan.  Since that time we have  initiated  discussions  with the servicer of the
loans regarding  restructuring of the loans. There can be no assurance that such
discussions will result in any modification to the terms of the loans.  However,
any action by the lender with  respect to these  properties  is not  expected to
have a material  impact on our  results of  operations  or  financial  condition
because we are currently only remitting  available cash flow. These non-recourse
mortgage loans require the monthly funding of escrow accounts for the payment of
real estate taxes,  insurance  and capital  improvements.  Such escrow  accounts
totaled $314 as of December 31, 2002,  which is included in  restricted  cash in
the  Consolidated  Balance Sheet (see Note 3 - "Restricted  Cash" for additional
information). The aggregate carrying value of these properties was $21,891 as of
December 31, 2002. Such amount is exceeded by the aggregate  outstanding balance
of the  non-recourse  mortgage  loans of $24,919 as of December 31, 2002. If the
lender were to foreclose on the collateral properties or we were to transfer our
ownership interest in the collateral properties to the lender, we would record a
non-recurring  gain  for  the  difference  between  the  carrying  value  of the
properties  and their related net assets and the  outstanding  loan balances and
related liabilities.

Defeased Notes Payable

     On December 6, 2002,  we  completed  the sale of our  Colorado  Properties,
which were part of the 15 properties  contained in the collateral  pool securing
the Mega Deal  Loan,  which  had a then  outstanding  balance  of  $338,940.  In
connection with the release of the Colorado Properties from the collateral pool,
we were required to partially  defease the Mega Deal Loan.  Therefore,  the Mega
Deal Loan was  bifurcated  into (i) a defeased  portion in the amount of $74,849
(the "Defeased Notes  Payable") and (ii) an undefeased  portion in the amount of
$264,091,  which is still  referred to as the Mega Deal Loan.  Both the Defeased
Notes  Payable  and the Mega  Deal Loan (i) bear  interest  at a  fixed-rate  of
7.782%,  (ii) require monthly  payments of principal and interest  pursuant to a
30-year  amortization  schedule and (iii) mature on November 11, 2003.  The Mega
Deal  Loan is now  secured  by the  remaining  13  properties  contained  in the
collateral  pool.  We used  $79,257 of the gross  proceeds  from the sale of the
Colorado Properties to purchase US Treasury Securities, which were placed into a
trustee  escrow (the "Trustee  Escrow").  The Trustee Escrow is used to make the
scheduled  monthly  debt  service  payments,  including  the payment of the then
outstanding  principal amount,  together with all accrued and unpaid interest on
the maturity date of November 11, 2003, under the Defeased Notes Payable.  As of
December 31, 2002,  the  outstanding  balance of the Defeased  Notes Payable was
$74,764  and  the  balance  of the  Trustee  Escrow  was  $79,042  (included  in
restricted  cash in the  Consolidated  Balance  Sheet).  See Note 3 -  "Property
Dispositions" for additional  information.  Furthermore,  in connection with the
partial  defeasance  of the Mega Deal Loan we amended the Mega Deal Loan so that
(i) we are required to fund 10 monthly  payments of $500 into a lender escrow to
be used as additional  cash collateral and (ii) release prices for the remaining
13 properties in the collateral  pool were amended to provide for a more orderly
refinancing of the Mega Deal Loan.

<PAGE>
                                  Page - (F-21)

Debt Service Obligations

     The scheduled principal  maturities of our debt,  excluding (i) unamortized
debt  premiums of $7,955 and (ii)  $41,250 of  aggregate  non-recourse  mortgage
indebtedness  in  default  (see  "Defaults  on  Certain  Non-recourse   Mortgage
Indebtedness"  above), and related average contractual interest rates by year of
maturity as of December 31, 2002 are as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                     Bonds Payable
                                  (including sinking                                       Defeased
                                    fund payments)            Notes Payable              Notes Payable               Total Debt
                                 ---------------------  ------------------------    ----------------------   -----------------------
                                   Average                Average                      Average                Average
                                  Interest  Principal    Interest     Principal       Interest   Principal    Interest   Principal
Years Ended December 31,           Rates    Maturities    Rates       Maturities       Rates     Maturities    Rates     Maturities
------------------------------------------------------------------------------------------------------------------------------------
<C>                                <C>     <C>             <C>        <C>              <C>        <C>           <C>       <C>
2003                               6.33%   $    680        7.79%      $ 266,659        7.78%      $ 74,764      7.78%     $ 342,103
2004                               6.34%        726        8.44%          3,075                                 8.04%         3,801
2005                               6.34%        773        8.58%         11,574                                 8.44%        12,347
2006                               6.34%        820        8.83%        120,437                                 8.81%       121,257
2007                               6.34%        878        7.60%          1,002                                 7.02%         1,880
Thereafter                         6.52%     18,618        7.57%         59,491                                 7.32%        78,109
                                   ----    --------        ----       ---------        ----       --------      ----      ----------
                                   6.49%   $ 22,495        8.06%      $ 462,238        7.78%      $ 74,764      7.96%     $ 559,497
                                   ====    ========        ====       =========        ====       ========      ====      ==========
====================================================================================================================================
</TABLE>

     Such indebtedness in the amount of $559,497 had a weighted-average maturity
of 2.6 years and bore contractual  interest at a weighted-average  rate of 7.96%
per annum. At December 31, 2002, all of such indebtedness bore interest at fixed
rates.  Our  scheduled  principal  payments  during  2003 for such  indebtedness
aggregated $342,103. In addition to regularly scheduled principal payments,  the
2003 scheduled  principal payments also reflect balloon payments of (i) $260,681
for the Mega Deal Loan and (ii) $73,882 due for the Defeased Notes Payable. Both
the Mega Deal Loan and the  Defeased  Notes  Payable are  scheduled to mature on
November  11,  2003.  All debt  service due under the  Defeased  Notes  Payable,
including  the balloon  payment due at  maturity,  will be made from the Trustee
Escrow. See "Going Concern" for additional information.

Interest Expense

     Interest costs are summarized as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                                 2002             2001             2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>              <C>              <C>
Interest incurred                                                                      $ 58,574         $ 75,451         $ 89,286
Amortization of deferred financing costs                                                  4,747            6,341            2,922
Non-recurring loss on early extinguishment of debt                                          525                -            4,206
Amortization of debt premiums                                                            (2,020)          (1,928)          (1,841)
Interest capitalized to development projects                                                  -                -           (3,412)
                                                                                       --------         --------         --------
  Total                                                                                $ 61,826         $ 79,864         $ 91,161
                                                                                       ========         ========         ========

Interest paid                                                                          $ 64,757         $ 86,551         $ 99,611
                                                                                       ========         ========         ========
====================================================================================================================================
</TABLE>

     The aggregate carrying amount of our debt at December 31, 2002 approximated
its fair value. Additionally,  as of December 31, 2002, substantially all of our
assets were pledged as collateral for our debt.

Defaults  on  Certain   Non-recourse  Mortgage  Indebtedness  of  Unconsolidated
Partnerships

     Two mortgage loans related to projects in which we,  through  subsidiaries,
indirectly  own joint  venture  interests  have matured and are in default.  The
mortgage loans,  at the time of default,  were (i) a $10,389 first mortgage loan
on Phase I of the Bellport  Outlet  Center,  held by Union Labor Life  Insurance
Company  ("Union  Labor");  and (ii) a  $13,338  first  mortgage  loan on Oxnard
Factory Outlet, an outlet center located in Oxnard, California, held by Fru-Con.
An affiliate of ours has a 50% ownership interest in the partnership, which owns
Phase I of the Bellport Outlet Center.  Fru-Con and us are each a 50% partner in
the partnership that owns the Oxnard Factory Outlet.

     Union Labor filed for  foreclosure on Phase I of the Bellport Outlet Center
and a  receiver  was  appointed  March  27,  2001 by the court  involved  in the
foreclosure action. Effective May 1, 2001, a manager hired by the receiver began
managing  and leasing  Phase I of the  Bellport  Outlet  Center.  A judgment for
foreclosure  was  entered on January  25,  2003 in the  amount of  $12,711.  The
foreclosure  occurred on March 17, 2003 with Union Labor  acquiring the property
for $5,100.  We continue to negotiate  the terms of a transfer of our  ownership
interest in Oxnard Factory  Outlet to Fru-Con.  We do not manage or lease Oxnard
Factory Outlet.

     We  believe  neither  of these  mortgage  loans is  recourse  to us.  It is
possible,  however,  that either or both of the respective  lenders will,  after
completing its foreclosure action, file a lawsuit seeking to collect from us the
difference  between the value of the mortgaged property and the amount due under
the loan. If such an action is brought, the outcome, and our ultimate liability,
if any, cannot be predicted at this time.

<PAGE>
                                  Page - (F-22)

     In addition,  we are currently not receiving,  directly or indirectly,  any
cash flow from Oxnard  Factory  Outlet and were not receiving any cash flow from
Phase I of the  Bellport  Outlet  Center  prior to the loss of  control  of such
project.  We account for our  interests in (i) Phases I of the  Bellport  Outlet
Center and (ii) the Oxnard Factory  Outlet in accordance  with the equity method
of  accounting.  As of  December  31,  2002,  we had no  carrying  value for our
investment in these properties.


2002 Debt Transactions

     We disposed of certain properties through various  transactions,  including
sale, joint venture arrangements, foreclosure and transfer to lender, during the
year ended December 31, 2002. In connection with these dispositions,  we reduced
our indebtedness by $349,378, including the partial defeasance of $74,849 of the
Mega Deal Loan.  This  reduction  also  includes (i) the repayment of associated
mortgage indebtedness  aggregating $168,982,  (ii) debt assumed by the purchaser
of $46,862 and (iii) debt associated with  foreclosure or transfer of properties
aggregating  $58,685.  See  Note  3 -  "Property  Dispositions"  for  additional
information.

     At the beginning of 2002, our Mezzanine Loan had an outstanding  balance of
$62,079.  During 2002 we repaid the Mezzanine Loan in full through (i) regularly
scheduled  monthly  principal  payments   aggregating  $9,295,  (ii)  additional
principal payments  aggregating $45,467 made with excess proceeds from our asset
sales (see Note 3 - "Property  Dispositions"  for  additional  information)  and
(iii) a payoff  of  $7,317  with  cash  from  escrows  and  operating  cash.  In
connection  with the early  extinguishment  of the Mezzanine Loan, we incurred a
non-recurring  loss of $525  (included in interest  expense in the  Consolidated
Statements  of  Operations)  in the  fourth  quarter  of 2002  representing  the
write-off of remaining  unamortized deferred financing costs. The Mezzanine Loan
was  obtained  in  December  2000 in the  original  amount  of  $90,000  and was
scheduled to mature on September 30, 2003.  Through a series of  amendments  and
modifications  to its terms, the Mezzanine Loan bore interest at a fixed-rate of
19.75% at the time of the retirement.

Guarantees and Guarantees of Indebtedness of Others

HGP Guarantees

     On July 15, 2002, Horizon Group Properties, Inc. and its affiliates ("HGP")
announced they had refinanced a secured credit facility (the "HGP Secured Credit
Facility")  through  a series  of new loans  aggregating  $32,500.  Prior to the
refinancing,  we were a guarantor  under the HGP Secured Credit  Facility in the
amount of $10,000. In connection with the refinancing, our guarantee was reduced
to a maximum  of  $4,000 as  security  for a $3,000  mortgage  loan and a $4,000
mortgage loan  (collectively,  the "HGP Monroe  Mortgage Loan") secured by HGP's
outlet shopping center located in Monroe, Michigan. The HGP Monroe Mortgage Loan
has a 3-year term,  bears  interest at the prime lending rate plus 2.50% (with a
minimum of 9.90%) and requires monthly  interest-only  payments.  The HGP Monroe
Mortgage Loan may be prepaid without penalty after two years. Our guarantee with
respect to the HGP Monroe  Mortgage Loan will be  extinguished  if the principal
amount of such obligation is reduced to $5,000 or less through repayments.

     Additionally,   we  are  a  guarantor  with  respect  to  certain  mortgage
indebtedness  (the "HGP Office  Building  Mortgage")  in the amount of $2,240 on
HGP's corporate office building and related  equipment located in Norton Shores,
Michigan. The HGP Office Building Mortgage matures in April 2003, bears interest
at LIBOR plus 5.50%, and requires monthly debt service payments.

     On October 11, 2001,  HGP announced  that it was in default under two loans
with an aggregate  principal  balance of approximately  $45.5 million secured by
six of its other outlet centers.  Such defaults do not constitute defaults under
the HGP Monroe  Mortgage Loan or the HGP Office  Building  Mortgage nor did they
constitute a default under the HGP Secured Credit Facility. We have not recorded
any liability related to these guarantees and no claims have been made under our
guarantees  with  respect  to the HGP  Monroe  Mortgage  Loan or the HGP  Office
Building  Mortgage.  HGP  is a  publicly  traded  company  that  was  formed  in
connection with our merger with Horizon Group, Inc. ("Horizon") in June 1998.

Prime/Estein Venture Guarantees

     Pursuant to Prime/Estein  Venture-related  documents to which affiliates of
ours  are  parties,  we  are  obligated  to  provide  to,  or  obtain  for,  the
Prime/Estein  Venture  fixed-rate  financing  at an  annual  rate of 7.75%  (the
"Interest Rate Subsidy  Agreement") for the Birch Run Center,  the  Williamsburg
Center and the Hagerstown Center.

<PAGE>
                                  Page - (F-23)

     In August 2001, we, through affiliates,  completed a refinancing of $63,000
of first  mortgage loans secured by the Birch Run Center.  The  refinanced  loan
(the "Birch Run First Mortgage") (i) has a term of 10-years, (ii) bears interest
at an effective rate of 8.12% and (iii) requires  monthly  payments of principal
and  interest  pursuant  to a 25-year  amortization  schedule.  Pursuant  to the
Interest  Rate Subsidy  Agreement,  we are  required to pay to the  Prime/Estein
Venture the  difference  between the cost of the financing at an assumed rate of
7.75% and the actual  cost of such  financing  at the annual  rate of 8.12% (the
"Interest  Rate Subsidy  Obligation").  The total  payments to the  Prime/Estein
Venture  by us over  the term of the  Birch  Run  First  Mortgage  Loan  will be
approximately  $2,723.  In  connection  with  the  refinancing,  we  recorded  a
non-recurring  loss of $1,882  (included  in other  charges in the  Consolidated
Statements of Operations)  during the third quarter of 2001 representing the net
present value of the Interest  Rate Subsidy  Obligation.  Additionally,  we also
incurred $1,036 of non-recurring  refinancing  costs (included in other charges)
in the third quarter of 2001. As of December 31, 2002, the Interest Rate Subsidy
Obligation   (included  in  accounts  payable  and  other   liabilities  in  the
Consolidated Balance Sheet) was $1,477.

     In October 2001, we,  through  affiliates,  completed the  refinancing of a
$32,500 first mortgage loan secured by the  Williamsburg  Center.  The new first
mortgage loan (the  "Williamsburg  First  Mortgage") (i) has a term of 10-years,
(ii) bears interest at a fixed-rate of 7.69% and (iii) requires monthly payments
of principal and interest pursuant to a 25-year amortization schedule.  Pursuant
to the Interest Rate Subsidy Agreement,  the Prime/Estein Venture is required to
pay to us the difference between the cost of the financing at an assumed rate of
7.75% and the actual cost of such financing at the annual rate of 7.69%.

     On January 11,  2002,  we sold the  Hagerstown  Center to the  Prime/Estein
Venture.  In connection  with the sale,  the  Prime/Estein  Venture  assumed the
Hagerstown  First Mortgage in the amount of $46,862;  however,  our guarantee of
such indebtedness remains in place. Additionally,  we are obligated to refinance
the Hagerstown First Mortgage on behalf of the Prime/Estein Venture on or before
June 1, 2004, the date on which such  indebtedness  matures.  Additionally,  the
Prime/Estein Venture's cost of the Hagerstown First Mortgage and any refinancing
of it are  fixed at an annual  rate of 7.75%  for a period  of 10 years.  If the
actual  cost of such  indebtedness  should  exceed  7.75% at any time during the
10-year period,  we will be obligated to pay the difference to the  Prime/Estein
Venture.  If the actual cost of such indebtedness is less than 7.75% at any time
during the 10-year period,  however,  the Prime/Estein Venture will be obligated
to pay the difference to us. The actual cost of the Hagerstown First Mortgage is
30-day  LIBOR  plus  1.50%,  or 2.88%  as of  December  31,  2002.  Because  the
Hagerstown  First  Mortgage bears interest at a variable rate, we are exposed to
the impact of interest rate changes.  We have not recorded any liability related
to our guarantee of the Hagerstown First Mortgage;  however,  in connection with
the sale of the  Hagerstown  Center,  we  established  a reserve  for  estimated
refinancing  costs in the amount of $937,  which is included in accounts payable
and other liabilities in the Consolidated Balance Sheet as of December 31, 2002.
See Note 3 -  "Property  Dispositions"  of the Notes to  Consolidated  Financial
Statements for additional information.

Mandatory Redemption Obligation

     On July 26, 2002,  we sold the Bridge  Properties  to the PFP  Venture.  In
connection  with the sale, we guaranteed FRIT (i) a 13% return on its $17,236 of
invested  capital and (ii) the full return of its  invested  capital by December
31, 2003. As of December 31, 2002,  our  Mandatory  Redemption  Obligation  with
respect to the full return of FRIT's invested  capital was $16,667  (included in
accounts payable and other liabilities in the Consolidated  Balance Sheet).  See
Note 3 - "Property Dispositions" for additional information.

Going Concern

     Our liquidity  depends on cash provided by operations and potential capital
raising  activities  such as funds  obtained  through  borrowings,  particularly
refinancing of existing debt, and cash generated  through asset sales.  Although
we believe that  estimated  cash flows from  operations  and  potential  capital
raising  activities will be sufficient to satisfy our scheduled debt service and
other  obligations and sustain our operations for the next year, there can be no
assurance  that we will be successful in obtaining the required  amount of funds
for these items or that the terms of the potential  capital raising  activities,
if they should  occur,  will be as  favorable  as we have  experienced  in prior
periods.

     During 2003, our Mega Deal Loan matures on November 11, 2003. The Mega Deal
Loan,  which is secured by a 13 property  collateral  pool,  had an  outstanding
principal balance of $263,793 as of December 31, 2002 and will require a balloon
payment of $260,681 at maturity.  Based on our initial  discussions with various
prospective  lenders,  we are currently  projecting a potential  shortfall  with
respect  to  refinancing  the Mega Deal  Loan.  Nevertheless,  we  believe  this
shortfall may be alleviated  through  potential asset sales and/or other capital
raising activities,  including the placement of mezzanine level debt. We caution
that our assumptions are based on current market conditions and, therefore,  are
subject to  various  risks and  uncertainties,  including  changes  in  economic
conditions  which may  adversely  impact our ability to refinance  the Mega Deal
Loan at  favorable  rates or in a timely  and  orderly  fashion  and  which  may
adversely impact our ability to consummate various asset sales or other capital
raising activities.

<PAGE>
                                  Page - (F-24)

     In connection  with the completion of the sale of the Bridge  Properties in
July 2002,  we  guaranteed  to FRIT (i) a 13% return on its  $17,236 of invested
capital,  and (ii) the full return of the  Mandatory  Redemption  Obligation  by
December 31, 2003. As of December 31, 2002, the Mandatory Redemption  Obligation
(included in accounts payable and other liabilities in the Consolidated  Balance
Sheet)  was  $16,237.  See  Note  3 -  "Property  Dispositions"  for  additional
information.  Although we are in the  process of seeking to generate  additional
liquidity to repay the Mandatory  Redemption  Obligation through (i) the sale of
FRIT's ownership  interest in the Bridge Properties and/or (ii) the placement of
additional indebtedness on the Bridge Properties, there can be no assurance that
we will be able to complete such capital raising activities by December 31, 2003
or that such capital  raising  activities,  if they should occur,  will generate
sufficient  proceeds  to repay  the  Mandatory  Redemption  Obligation  in full.
Failure to repay the Mandatory Redemption  Obligation by December 31, 2003 would
constitute  a default,  which  would  enable  FRIT to  exercise  its rights with
respect to the collateral  pledged as security to the guarantee,  including some
of our  partnership  interests  in the 13  property  collateral  pool  under the
aforementioned Mega Deal Loan.

     These conditions raise substantial doubt about our ability to continue as a
going  concern.  The financial  statements  contained  herein do not include any
adjustment  to reflect the possible  future  effects on the  recoverability  and
classification  of assets or the amounts and  classification of liabilities that
may result from the outcome of these uncertainties.

Note 7 - Investment in Unconsolidated Joint Ventures

     We  account  for  our  investment  in  unconsolidated   joint  ventures  in
accordance  with the equity  method of  accounting  as we  exercise  significant
influence,  but do not  control  these  entities.  In all of our  joint  venture
arrangements,  the  rights  of the  investors  are  both  protective  as well as
participating.   Therefore,   these   participating   rights  preclude  us  from
consolidating  our  investments.  Our investments are recorded  initially at our
cost  and  subsequently  adjusted  for  equity  in  earnings  (losses)  and cash
contributions and distributions.

     As of  December  31,  2002  our  interests  in joint  venture  partnerships
included (i) three outlet centers owned by the Prime/Estein Venture and (ii) six
properties owned by the PFP Venture. The Prime/Estein Venture owns the Birch Run
Center,  the  Williamsburg  Center and the  Hagerstown  Center which  contain an
aggregate  1,485,000  square  feet  of GLA.  The PFP  Venture  owns  the  Bridge
Properties (Prime Outlets at Anderson,  Prime Outlets at Calhoun,  Prime Outlets
at Gaffney,  Prime Outlets at Latham,  Prime Outlets at Lee and Prime Outlets at
Lodi)  which  contain an  aggregate  1,304,000  square feet of GLA. On April 19,
2002,  we  completed  the  sale  of the  Bellport  Outlet  Center.  We had a 51%
ownership  interest in the joint  venture  partnership  that owned the  Bellport
Outlet Center and accounted  for our ownership  interest in accordance  with the
equity  method  of  accounting  through  the date of  disposition.  See Note 3 -
"Property Dispositions" and Note 6 - "Debt" for additional information.

     The following summarizes unaudited condensed financial  information for the
Bellport Outlet Center,  the Prime/Estein  Venture and the PFP Venture as of and
for the year ended December 31, 2002:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                               Bellport        Prime/Estein
Years Ended December 31, 2002                               Outlet Center         Venture          PFP Venture             Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>                 <C>                 <C>
Total revenues                                                 $  622            $ 35,712            $ 10,571            $ 46,905
Total expenses                                                  1,000              33,547               8,604              43,151
                                                               ------            --------            --------            --------
  Net income (loss)                                            $ (378)           $  2,165            $  1,967            $  3,754
                                                               ======            ========            ========            ========
====================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                               Prime/Estein
December 31, 2002                                                                 Venture           PFP Venture            Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                 <C>                 <C>
Total assets                                                                    $ 242,921           $ 127,933           $ 370,854
Total liabilities                                                                 144,063              92,779             236,842
Total partners' capital                                                            98,858              35,154             134,012
====================================================================================================================================
</TABLE>

<PAGE>
                                  Page - (F-25)

     The following summarizes our investment in unconsolidated joint ventures as
of  December  31,  2002,  and 2001 and  related  activity  during the year ended
December 31, 2002:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                               Bellport         Prime/Estein
                                                             Outlet Center         Venture          PFP Venture           Total
------------------------------------------------------------------------------------------------------------------------------------
<S>               <C> <C>                                      <C>                <C>                 <C>                 <C>
Balance, December 31, 2001                                     $ 1,689            $ 22,850            $      -            $ 24,539

Capital contributions                                                -               2,974              23,349              26,323

Equity in earnings (losses)  (1)                                  (378)                673                 671                 966

Distributions                                                      (86)                (62)               (566)               (714)

Proceeds from sale                                                (522)                  -                   -                (522)

Loss on sale                                                      (703)                  -                   -                (703)
                                                               -------            --------            --------            --------
Balance, December 31, 2002                                     $     -            $ 26,435            $ 23,454            $ 49,889
                                                               =======            ========            ========            ========
====================================================================================================================================
</TABLE>

Note:
(1)  Equity in earnings (losses) is included in interest and other income in the
     Consolidated Statements of Operations. Additionally, our share of equity in
     losses  for the years  ended  December  31,  2001 and 2000 were  $1,594 and
     $2,552, respectively.

Note 8 - Minority Interests

     In conjunction with the formation of the Operating  Partnership and us, 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 our merger with Horizon Group,
Inc. Subject to certain  conditions,  each Common Unit held by a Limited Partner
may be exchanged for one share of Common Stock or, at our option,  cash equal to
the fair market value of a share of Common Stock at the time of exchange.

     During 2002 and 2001,  no Common Units were  exchanged for shares of Common
Stock.  During 2000,  29,296  Common Units were  exchanged  for shares of Common
Stock.  As of  December  31,  2002,  10,810,912  Common  Units  were  issued and
outstanding.   Minority   interests  also  include  interests  in  two  property
partnerships  that are not wholly owned by the  Company.  During the years ended
December 31, 2002, 2001, and 2000, expenses totaling $1,687,  $1,981 and $2,928,
respectively,  related solely to our operation 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, 2002,  there was no allocation of losses
or income to minority  interests.  During the years ended  December 31, 2001 and
2000,  the  loss  allocated  to  minority   interests  totaled  $408  and  $738,
respectively.  Previous  cash  distributions  and losses  allocated  to minority
interests have reduced our 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  would be  treated  as income
allocated to minority interests.

Note 9 - Shareholders' Equity

     We are 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,
2002,  43,577,916  shares of common stock,  2,300,000  shares of Series A Senior
Preferred  Stock and 7,828,125  shares of Series B Convertible  Preferred  Stock
were issued and  outstanding.  The Series A 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,  if  declared,  on the Series A Senior  Preferred  Stock are  payable
quarterly in the amount of $2.625 per share per annum.  Dividends,  if declared,
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, 2002,  there were  9,363,786  shares of Common Stock  reserved for
future issuance upon conversion of the Series B Convertible Preferred Stock.

     We have the right to redeem our Series A Senior  Preferred Stock and 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.

<PAGE>
                                  Page - (F-26)

     To qualify as a REIT for federal  income tax  purposes,  we are required to
pay  distributions  to our common and preferred  shareholders of at least 90% of
our REIT taxable income in addition to satisfying other  requirements.  Although
we intend to make  distributions,  if necessary,  to remain  qualified as a REIT
under the Code,  we also intend to retain such amounts as we consider  necessary
from time to time for our capital and liquidity needs.

     Our policy  remains to pay  distributions  only to the extent  necessary to
maintain our status as a REIT for federal  income tax purposes.  During 2002, we
were not required to pay any  distributions in order to maintain our status as a
REIT and based on our current federal income tax  projections,  we do not expect
to pay any  distributions  during 2003.  We are currently in arrears on thirteen
quarters of preferred stock distributions due February 15, 2000 through February
15, 2003, respectively.

     We may not make distributions to our common  shareholders or our holders of
common  units of limited  partnership  interests  in the  Operating  Partnership
unless  we  are  current  with  respect  to   distributions   to  our  preferred
shareholders. As of December 31, 2002, unpaid dividends for the period beginning
on November 16, 1999 through  December 31, 2002 on our Series A Senior Preferred
Stock and Series B Convertible  Preferred Stock aggregated  $18,867 and $51,984,
respectively.  The  annualized  dividends  on our  2,300,000  shares of Series A
Senior  Preferred Stock and 7,828,125  shares of Series B Convertible  Preferred
Stock  outstanding  as of December  31,  2002 are $6,037  ($2.625 per share) and
$16,635 ($2.125 per share), respectively.

Note 10 - Stock Incentive Plans

     Under  various  plans,  we 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 our 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  2002 we  granted  options  to  executive  officers  and  other  key
employees to purchase 1,892,524 shares of common stock at $0.11 per share. These
options, which have a term of 10 years, vest pro-ratable on the anniversary date
of the grant over a three-year  period.  As of December 31, 2002,  none of these
options were vested.  During 2001, we granted options to an executive officer to
purchase 300,000 shares of common stock at $2.00 per share. These options, which
have a term of 10 years, were fully vested on the date of grant. During 2000, we
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 fully  vested on
June  30,  2001.  Additionally,  during  2000,  we  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,  vested  pro-ratably on a monthly basis from May 1, 2000 through February
1, 2001.

     We have adopted the disclosure-only  provisions of FAS No. 123, "Accounting
for Stock Based  Compensation."  Accordingly,  no compensation  expense has been
recognized  for  employee  stock option  grants.  If we had elected to recognize
compensation  based on the fair  value of the  options  granted at grant date as
prescribed by FAS No. 123, our unaudited pro forma net loss per share would have
been as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                             2002               2001                2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                <C>                <C>
Net loss                                                                          $  (99,121)        $  (98,209)        $ (144,116)
                                                                                  ==========         ==========         ==========
Net loss applicable to common shares                                              $ (121,793)        $ (120,881)        $ (166,788)
                                                                                  ==========         ==========         ==========
Basic and diluted loss per common share                                           $    (2.79)        $    (2.77)        $    (3.83)
                                                                                  ==========         ==========         ==========
------------------------------------------------------------------------------------------------------------------------------------
</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,                                                              2002               2001                2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                    <C>                <C>                 <C>
Risk-free interest rate                                                                5.0%               5.0%                5.0%
Dividend yield                                                                         0.0%               0.0%                0.0%
Volatility factor                                                                      0.37               0.37                0.87
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  our  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>
                                  Page - (F-27)

        A summary of our stock option plans for the years ended December 31 are
as follows:
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                      2002                            2001                           2000
                                            ---------------------------    --------------------------     --------------------------
                                                            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                            4,388,756        $ 9.49         4,131,056       $  9.98        3,280,317       $ 14.12
Granted                                      1,892,524          0.11           300,000          2.00        1,507,600          1.91
Cancelled                                   (2,220,967)         5.69           (42,300)         4.09         (656,861)        12.13
                                            ----------        ------         ---------       -------        ---------       -------
End of year                                  4,060,313        $ 4.83         4,388,756       $  9.49        4,131,056       $  9.98
                                            ==========        ======         =========       =======        =========       =======
Exercisable - end of year                    2,167,789        $ 8.96         3,998,756       $ 10.10        3,276,987       $ 11.84
                                            ==========        ======         =========       =======        =========       =======
====================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                          Options Outstanding                              Options Exercisable
                                                    -------------------------------------------------   ----------------------------
                                                                           Weighted        Weighted                         Weighted
                                                                            Average         Average                          Average
                                                                          Remaining        Exercise                         Exercise
Range of Exercise Price                                     Shares    Life in Years           Price          Shares            Price
------------------------------------------------------------------------------------------------------------------------------------
<C>                                                      <C>                    <C>          <C>          <C>                 <C>
$0.11                                                    1,892,524              9.4          $ 0.11               -           $    -
$1.69 to $2.00                                             753,230              6.0            1.83         753,230             1.83
$8.50                                                       60,000              6.6            8.50          60,000             8.50
$11.15 to $13.09                                         1,140,705              4.5           12.25       1,140,705            12.25
$13.60 to $14.19                                           142,490              4.3           13.67         142,490            13.67
$19.00                                                      30,000              1.2           19.00          30,000            19.00
$23.53                                                      13,788              3.3           23.53          13,788            23.53
$24.55 to $26.57                                            27,576              2.2           26.13          27,576            26.13
                                                         ---------              ---          ------       ---------           ------
  Total                                                  4,060,313              7.1          $ 4.83       2,167,789           $ 8.96
                                                         =========              ===          ======       =========           ======
====================================================================================================================================
</TABLE>

     The weighted fair value of options  granted during the years ended December
31,  2002,  2001 and 2000 was $0 per share.  Under our various  plans there were
1,225,224 and 1,170,986  shares  reserved for future grants at December 31, 2002
and 2001, respectively.

Note 11 - Lease Agreements

     Certain non-recourse mortgage loans on four outlet centers are currently in
default.  We are  currently  negotiating  the  transfer  of one of these  outlet
centers,  the Woodbury Center, to the lender.  The other three properties (Prime
Outlets at Bend, Prime Outlets at Post Falls and Prime Outlets at Sedona) secure
first  mortgage  loans  that  are  cross-collateralized.  We  are  currently  in
discussion  with  the loan  servicer  regarding  restructuring  the  loans.  See
"Defaults on Certain Non-recourse Indebtedness" contained in Note 6 - "Debt" for
additional  information.  The following disclosures exclude the lease agreements
related to these properties.

     We are the lessors of retail and office space under  operating  leases with
lease terms that expire from 2003 to 2017.  Many of these leases contain renewal
provisions at the lessee's option. Future minimum base rent to be received under
noncancelable operating leases as of December 31, 2002 were as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
<C>                                                                                                                       <C>
2003                                                                                                                      $ 67,929
2004                                                                                                                        51,002
2005                                                                                                                        36,160
2006                                                                                                                        25,261
2007                                                                                                                        16,870
Thereafter                                                                                                                  31,327
                                                                                                                         ---------
                                                                                                                         $ 228,549
                                                                                                                         =========
====================================================================================================================================
</TABLE>

<PAGE>
                                  Page - (F-28)

     We lease certain land, buildings, and equipment under various noncancelable
operating  lease  agreements.  Rental  expense for operating  leases was $1,759,
$1,782,  and $2,988 for the years  ended  December  31,  2002,  2001,  and 2000,
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, 2002 consisted of the following:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
<C>                                                                                                            <C>
2003                                                                                                           $ 1,519
2004                                                                                                             1,199
2005                                                                                                               348
2006                                                                                                               268
2007                                                                                                               201
Thereafter                                                                                                       5,178
                                                                                                               -------
                                                                                                               $ 8,713
                                                                                                               =======
====================================================================================================================================
</TABLE>

Note 12 - Special Charges

Non-recurring Other Charges

     During the second  quarter of 2002, we recorded a  non-recurring  charge in
the amount of $3,000 to  establish a reserve for  pending and  potential  tenant
claims with respect to lease provisions  related to their  pass-through  charges
and promotional fund charges. We had previously recorded a non-recurring  charge
in the amount of $2,000 to  establish a reserve for similar  matters  during the
fourth  quarter of 2001.  To date,  we have entered into  settlement  agreements
providing  for  payments  aggregating  $2,760,  of which  $2,607  was paid as of
December  31,  2002.  The  remaining  reserve of $2,393 is  included in accounts
payable and other  liabilities in the Consolidated  Balance Sheet as of December
31, 2002. See Note 13 - "Legal Proceedings" for additional information.

     These reserves were estimated in accordance with our  established  policies
and procedures with respect to loss contingencies (see "Contingencies" contained
in Note 2 - "Significant Accounting Policies" for additional information) and is
based on our current  assessment of the  likelihood of any adverse  judgments or
outcomes to these matters. Based on presently available information,  we believe
it is probable  the  remaining  reserve  will be utilized  over the next several
years in  connection  with the  resolution  of further  claims  relating  to the
pass-through  and  promotional  fund  provisions  contained  in our  leases.  We
caution,  however,  that given the inherent  uncertainties of litigation and the
complexities  associated  with a  large  number  of  leases  and  other  factual
questions at issue, actual costs may vary from our estimate.

     Additionally,  the 2001 results  include (i) a third quarter  non-recurring
loss of $1,882  representing  the net present value of our Interest Rate Subsidy
Obligation on the Birch Run Center and (ii) a third quarter  non-recurring  loss
of $1,036  related to the  refinancing  of first mortgage loans on the Birch Run
Center. See "Prime/Estein  Venture Guarantees"  contained in Note 6 - "Debt" for
additional information.

     The 2000  results  include  (i)  non-recurring  costs of $5,517  related to
eOutlets.com  (as  discussed  below),  (ii) a loss on operations of our Designer
Connection outlet stores of $1,815 and (iii)  non-recurring  third quarter costs
of  $1,100  related  to the  termination  of a sale  agreement.  We  ceased  the
operations of our Designer Connection outlet stores during 2000.

Provision for Asset Impairment

     During  the  third  quarter  of  2002,  certain  events  and  circumstances
occurred, including (i) changes to the anticipated holding periods of certain of
our long-lived  assets and (ii) reduced  occupancy and limited leasing  success,
that  indicated  that certain of our  properties  were impaired on an other than
temporary  basis.  As a result,  we  recorded a provision  for asset  impairment
aggregating  $81,619  representing  the write-down of these  properties to their
estimated  fair  values in  accordance  with the  requirements  of FAS No.  144.
Additionally,  during the fourth  quarter of 2002, we recognized a provision for
asset  impairment  of $2,474 to fully  write-off  the carrying  value of certain
costs previously  capitalized in connection with former  development  activities
based on our  current  assessment  as to our ability to recover  their  carrying
value.  During the third  quarter of 2001, we had also  determined  that certain
events and circumstances  had occurred,  including reduced occupancy and limited
leasing success,  that indicated that certain of our properties were impaired on
an other than temporary  basis.  As a result,  we recorded a provision for asset
impairment  aggregating  $63,026,  representing  the  write-down of the carrying
value of these  properties to their estimated fair values in accordance with the
requirements of FAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and Long-Lived  Assets to be Disposed of".  During 2000, we recorded a provision
for asset impairment  aggregating  $77,115.  This provision for asset impairment
consisted  of  (i) a  $28,047  write-down  of  the  carrying  value  of  certain
properties  resulting from their  classification to assets held for sale, (ii) a
$40,616 write-down of the carrying values of certain  properties  resulting from
other than  temporary  declines  in their  values and (iii) a $8,452  write-down
associated with our discontinuance of eOutlets.com (as discussed below).

<PAGE>
                                  Page - (F-29)

eOutlets.com

     In  April  2000,  we  announced  that we had been  unable  to  conclude  an
agreement  to transfer  ownership  of our  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.  eOutlets.com  was a new,  development-stage,
internet-based   business.   During  2000,  we  incurred  a  non-recurring  loss
aggregating  $14,703  related to  eOutlets.com.  This loss  consisted of (i) the
write-off  of $8,452 of  capitalized  costs  (included  in  provision  for asset
impairment),  (ii) $5,517 of costs  included in other  charges and (iii) $734 of
costs included in corporate general and administrative expense.

 Note 13 - Legal Proceedings

     Except  as  described  below,  neither  we nor  any of our  properties  are
currently  subject to any  material  litigation,  nor to our  knowledge,  is any
material  or  other  litigation   threatened  against  us,  other  than  routine
litigation arising in the ordinary course of business, some of which is expected
to be  covered  by  liability  insurance  and all of which  collectively  is not
expected to have an adverse effect on our consolidated financial statements.

     The  Company  and its  affiliates  were  defendants  in a lawsuit  filed by
Accrued  Financial  Services ("AFS") on August 10, 1999 in the Circuit Court for
Baltimore  City. The lawsuit was removed to United States District Court for the
District of Maryland (the "U.S. District Court") on August 20, 1999. AFS claimed
that  certain  tenants  had  assigned to AFS their  rights to make claims  under
leases such  tenants  had with  affiliates  of the Company and alleged  that the
Company and its affiliates  overcharged such tenants for common area maintenance
charges and  promotion  fund  charges.  The U.S.  District  Court  dismissed the
lawsuit on June 19, 2000. AFS appealed the U.S. District Court's decision to the
United States Court of Appeals for the Fourth Circuit. Briefs were submitted and
oral argument before a panel of judges of the United States Court of Appeals for
the Fourth  Circuit  was held on October  30,  2001,  during  which the panel of
judges  requested  further  briefing of certain  issues.  On July 29, 2002,  the
Fourth Circuit affirmed the dismissal. AFS filed a request for further review by
the Fourth  Circuit  which  request was denied.  In January,  2003,  AFS filed a
petition for a writ of  certiorari  by the United  States  Supreme Court and the
Company filed its opposition on February 24, 2003.  The Company  believes it has
acted properly and will continue to defend the suit vigorously if AFS's petition
is granted.  Nevertheless,  if the AFS writ of  certiorari  is  successful,  the
outcome of this lawsuit and the ultimate  liability of the  defendants,  if any,
cannot be predicted at this time.

     In addition,  certain tenants in the Company's and its  affiliates'  outlet
centers have made or may make  allegations  concerning  overcharging for CAM and
promotion fund charges  because of varying  clauses in their leases  pursuant to
which they claim under various  circumstances that they were not required to pay
some or all of the  pass-through  charges.  Such  claims if  asserted  and found
meritorious,  could have a material affect on the Company's financial condition.
Determination  of whether  liability  would exist to the Company would depend on
interpretation  of various lease clauses  within a tenant's lease and all of the
other leases at each center  collectively.  To date such issues have been raised
and resolved with Dinnerware Plus Holdings, Inc. ("Mikasa"),  Melru Corporation,
Designs,  Inc. and Brown Group Retail, Inc., all of which at one time or another
were in litigation, or threatened litigation with the Company. During the second
quarter of 2002,  the Company  recorded a  non-recurring  charge to  establish a
reserve in the amount of $3,000 for resolution of these matters,  in addition to
the Mikasa  matter  referred  to above.  This  reserve  which is included in the
accounts payable and other  liabilities in the Consolidated  Balance Sheet as of
December  31, was  estimated in  accordance  with our  established  policies and
procedures  concerning  loss  contingencies  for  additional  information).  The
balance  of the unused  reserve  is $2,393 as of  December  31,  2002.  Based on
presently  available  information,  the Company  believes  it is  probable  this
reserve  will be  utilized  over the next  several  years  in  resolving  claims
relating to the pass-through  and promotional  fund provisions  contained in its
leases. The Company cautions,  however, that given the inherent uncertainties of
litigation  and the  complexities  associated  with a large number of leases and
other factual questions at issue,  actual costs may vary from this estimate.  No
other such tenant, however, has filed a suit or indicated to the Company that it
intends to file a suit. Nevertheless, it is too early to make any predictions as
to whether the Company or its  affiliates  may be found  liable with  respect to
other tenants, or to predict damages should liability be found.

<PAGE>
                                  Page - (F-30)



     Affiliates of the Company  routinely file lawsuits to collect past rent due
from, and to evict,  tenants which have defaulted under their leases.  There are
currently dozens of such actions pending.  In addition to defending  against the
Company's   affiliates'   claims  and  eviction   actions,   some  tenants  file
counterclaims  against  the  Company's  affiliates.  A tenant  who files  such a
counterclaim typically claims that the Company's affiliate which owns the outlet
center in question has defaulted under the tenant's  lease,  has overcharged the
tenant for CAM and promotion fund charges,  made  misrepresentations  during the
leasing  process,  or has failed to  maintain  or market  the  outlet  center in
question as  required by the lease.  One such case  involves a  collections  and
eviction  action in Puerto Rico captioned  Outlet Village of Puerto Rico Limited
Partnership,  S.E.  v.  WEPA,  Inc.,  and  another,  for  instance,  involves  a
collection case in San Marcos, Texas, captioned, San Marcos Factory Stores, Ltd.
v. SM Collectibles,  Inc. d/b/a Country Clutter.  Usually such counterclaims are
without  merit.  In  response to such  counterclaims  the  Company's  affiliates
usually  continue to pursue  their  collection  or  eviction  actions and defend
against the counterclaims.  Despite the fact that the Company and its affiliates
believe such counterclaims are without merit and defend against them vigorously,
the outcome of all such counterclaims,  and, thus, the liability, if any, of the
Company and its affiliates, cannot be predicted at this time.

     Several entities (the "eOutlets  Plaintiffs")  filed or stated an intention
to file lawsuits (collectively, the "eOutlets Lawsuits") against the Company and
its affiliates  arising out of the Company's on-line venture,  primeoutlets.com.
inc.,  also  known as  eOutlets,  an  affiliate  of the  Company.  The  eOutlets
Plaintiffs seek to hold the Company and its affiliates responsible under various
legal theories for liabilities incurred by primeoutlets.com, inc., including the
theories that the Company  guaranteed  the  obligations of eOutlets and that the
Company was the  "alter-ego"  of eOutlets.  The Company  believes that it is not
liable to eOutlets Plaintiffs as there was no privity of contract between it and
the  various  eOutlets  Plaintiffs.  In the case  captioned  Convergys  Customer
Management Group, Inc. v. Prime Retail,  Inc. and  primeoutlets.com  inc. in the
Court of Common Pleas for Hamilton  County  (Ohio),  the Company  prevailed in a
motion to  dismiss  the  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.  In another  matter,  J. Walter  Thompson,  USA,  Inc. v. Prime
Retail,  L.P.  and Prime  Retail,  Inc.  the  Company  succeeded  in having  the
corporate veil piercing and alter ego claims dismissed and settled the remaining
claims in February  2003.  primeoutelts.com,  inc.  filed for  protection  under
Chapter 7 of the United  States  Bankruptcy  Code in  November of 2000 under the
name  E-Outlets  Resolution  Corp.  (the  "Debtor").  On November  5, 2002,  the
bankruptcy  trustee for the Debtor  brought suit against  Prime  Retail,  L.P. ,
Prime Retail, Inc., and Prime Retail E-Commerce,  Inc. (the "Entity Defendants")
and certain former  directors of the Debtor (the "Individual  Defendants").  The
Trustee  has  asserted  claims  of alter  ego,  promissory  estoppel,  breach of
contract,  breach of fiduciary  duty,  tortious  interference  with  prospective
business  advantage,  unjust  enrichment  and quantum  meruit against the Entity
Defendants  and  breach of  fiduciary  duty and  gross  negligence  against  the
individual defendants.  The Company has tendered the suit, both as to the Entity
Defendants and Individual  Defendants,  to its Directors' and Officers'  ("D&O")
insurance  carrier.  Motions  to  dismiss  the  suit  have  been  filed  by  all
Defendants.  All  Defendants  believe  the  suit is  without  merit  and plan on
defending it  vigorously.  Nevertheless,  the outcome of this  lawsuit,  and the
ultimate liability of the Company, if any, cannot be predicted at this time.

     In May 2001, the Company,  through  affiliates,  filed suit against Fru-Con
Construction,  Inc.  ("FCC"),  the lender on Prime  Outlets  at New River  ("New
River") as a result of FCC's  foreclosure  of New River due to the maturation of
the loan.  The Company  and its  affiliates  allege that they have been  damaged
because  of  FCC's  failure  to  dispose  of the  collateral  in a  commercially
reasonable  manner and as a result of a violation of federal trademark laws. The
Company,  through affiliates,  has also filed suit against The Fru-Con Projects,
Inc.  ("Fru-Con"),  a  partner  in  Arizona  Factory  Shops  Partnership  and an
affiliate of FCC. The Company and its  affiliates  allege that Fru-Con failed to
use reasonable  efforts to assist in obtaining  refinancing.  Fru-Con has claims
pending  against  the  Company  and its  affiliates,  as part of the same  suit,
alleging  that the Company  and its  affiliates  breached  their  contract  with
Fru-Con by not allowing  Fru-Con to  participate in an outlet project in Sedona,
Arizona (the "Sedona  Project") and breached a management and leasing  agreement
by managing and leasing the Sedona Project.  The Company believes its affiliates
and it  acted  property  and  FCC  did not act  properly.  The  Company  and its
affiliates  will  vigorously  defend the claims filed against them and prosecute
the claims they filed. Nevertheless, the ultimate outcome of the suit, including
the liability, if any, of the Company and its affiliates, cannot be predicted at
this time.

<PAGE>
                                  Page - (F-31)

Note 14 - Risk Management Activities

     We are subject to various market risks and  uncertainties,  including,  but
not limited to, the effects of current and future economic  conditions,  and the
resulting  impact on our revenue;  the effects of  increases in market  interest
rates from  current  levels (see  below);  the risks  associated  with  existing
vacancy  rates or potential  increases in vacancy  rates because of, among other
factors, tenant bankruptcies and store closures, and the resulting impact on our
revenue;  and risks  associated with refinancing our current debt obligations or
obtaining new financing  under terms less favorable than we have  experienced in
prior periods.

Interest Rate Risk

     In the  ordinary  course  of  business,  we are  exposed  to the  impact of
interest rate changes.  We employ established  policies and procedures to manage
our exposure to interest rate changes. Historically, we have used a mix of fixed
and  variable-rate  debt to (i) limit the impact of interest rate changes on our
results  from  operations  and cash flows and (ii) lower our  overall  borrowing
costs. In certain cases, we have used derivative  financial  instruments such as
interest rate protection agreements to manage interest rate risk associated with
variable-rate  indebtedness.  Nevertheless,  as of December 31, 2002, all of our
outstanding   indebtedness  bore  interest  at  fixed  rates.  As  discussed  in
"Guarantees  and Guarantees of  Indebtedness  of Others" of Note 6 - "Debt",  we
sold the Hagerstown Center on January 11, 2002 to the Prime/Estein  Venture.  In
connection with the sale, the Prime/Estein  Venture assumed the Hagerstown First
Mortgage in the amount of $46,862;  however,  our guarantee of such indebtedness
remains in place.  Additionally,  we are obligated to refinance  the  Hagerstown
First Mortgage on behalf of the Prime/Estein  Venture on or before June 1, 2004,
the date on which such  indebtedness  matures.  Additionally,  the  Prime/Estein
Venture's  cost of the Hagerstown  First Mortgage and any  refinancing of it are
fixed at an annual rate of 7.75% for a period of 10 years. If the actual cost of
such indebtedness  should exceed 7.75% at any time during the 10-year period, we
will be obligated to pay the  difference  to the  Prime/Estein  Venture.  If the
actual  cost of such  indebtedness  is less than  7.75% at any time  during  the
10-year period,  however,  the Prime/Estein Venture will be obligated to pay the
difference  to us. The actual cost of the  Hagerstown  First  Mortgage is 30-day
LIBOR plus 1.50%, or 2.88% as of December 31, 2002. Because the Hagerstown First
Mortgage  bears  interest  at a variable  rate,  we are exposed to the impact of
interest rate changes. At December 31, 2002, a hypothetical 100 basis point move
in the LIBOR rate would  impact our  guarantee  by $469.  See Note 3 - "Property
Dispositions" for additional information.

Economic Conditions

     In general,  the leases  relating to our outlet centers have terms of three
to five years and most contain  provisions that somewhat  mitigate the impact of
inflation.  Such provisions include clauses providing for increases in base rent
and clauses  enabling us to receive  percentage rents for annual sales in excess
of certain  thresholds  based on  merchants'  gross sales.  In  addition,  lease
agreements generally provide for (i) the recovery of a merchant's  proportionate
share of actual  costs of  common  area  maintenance  ("CAM"),  refuse  removal,
insurance,  and real estate  taxes,  (ii) a  contribution  for  advertising  and
promotion and (iii) an administrative fee. CAM includes items such as utilities,
security, parking lot cleaning,  maintenance and repair of common areas, capital
replacement  reserves,   landscaping,   seasonal  decorations,  public  restroom
maintenance  and certain  administrative  expenses.  We continually  monitor our
lease provisions in light of current and expected economic  conditions and other
factors.  In this regard,  we may consider  alternative  lease provisions (e.g.,
fixed CAM) where appropriate.

<PAGE>
                                  Page - (F-32)

                               PRIME RETAIL, INC.
             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 2002
                                 (in thousands)
<TABLE>
<CAPTION>
                                                      Costs Capitalized
                                   Initial Cost to     Subsequent to        Gross Amount at Which
                                      Company           Acquisition       Carried at Close of Period
                                   ---------------    -----------------  ----------------------------
                                           Bldgs &             Bldgs &                Bldgs &            Accumulated  Constructed(C)
Description           Encumbrance    Land  Improve     Land    Improve     Land       Improve     Total  Depreciation  Acquired  (A)
------------------------------------------------------------------------------------------------------------------------------------
<S>                   <C>         <C>     <C>        <C>       <C>        <C>        <C>         <C>        <C>        <C>
First Mortgage and
 Expansion Loan:
------------------
Prime Outlets at
 Darien               $ 24,090    $    -  $      -   $ 2,948   $ 12,022   $  2,948   $ 12,022    $ 14,970  $  7,826   1995 (C)
Prime Outlets at
 Ellenton               27,997         -         -     5,457     49,609      5,457     49,608      55,065    15,098   1991 (C)
Prime Outlets at
 Florida City           14,867         -         -     4,275      8,328      4,275      8,328      12,603     6,113   1994 (C)
Prime Outlets at
 Gainesville            19,804         -         -     1,100     15,363      1,100     15,363      16,463     9,860   1993 (C)
Prime Outlets at
 Grove City             39,282     1,123    58,630       800      2,730      1,923     61,360      63,283    12,237   1996 (A)
Prime Outlets at
 Gulfport               18,990         -         -         -     35,593          -     35,593      35,593    10,216   1995 (C)
Prime Outlets at
 Huntley                16,928         -         -     1,970     17,784      1,970     17,784      19,754     9,464   1994 (C)
Prime Outlets at
 Jeffersonville I       25,229       843    31,084       196     15,362      1,039     46,446      47,485    13,265   1994 (A)
Prime Outlets at
 Lebanon                24,741         -         -     2,689     31,854      2,689     31,854      34,543     7,720   1998 (C)
Prime Outlets at
 Morrisville             8,959         -         -     2,502     12,977      2,502     12,977      15,479     6,866   1991 (C)
Prime Outlets at
 Naples                 10,309     2,753    15,602         5     (6,583)     2,758      9,019      11,777     4,175   1994 (A)
Prime Outlets at
 Odessa                 13,890       815    31,311         -    (19,754)       815     11,557      12,372     6,609   1996 (A)
Prime Outlets at
 San Marcos             37,600         -         -     1,995     46,698      1,995     46,698      48,693    17,306   1990 (C)
Unallocated defeased
 debt                  (18,893)        -         -         -          -          -          -           -         -   Not applicable
                      --------   -------  --------   -------   --------   --------   --------    --------  --------
  Total                263,793     5,534   136,627    23,937    221,983     29,471    358,609     388,080   126,755
                      --------   -------  --------   -------   --------   --------   --------    --------  --------

First Mortgage Loan:
--------------------
Prime Outlets at
 Bend                    7,383     2,560     8,476     1,101        449      3,661      8,925      12,586     2,299   1997 (A)
Prime Outlets at
 Post Falls             10,983     3,100    12,163         -     (7,608)     3,100      4,555       7,655     1,880   1997 (A)
Prime Outlets at
 Sedona                  6,553     1,924     9,099       750     (4,464)     2,674      4,635       7,309     1,480   1997 (A)
                      --------   -------  --------   -------   --------   --------   --------    --------  --------
  Total                 24,919     7,584    29,738     1,851    (11,623)     9,435     18,115      27,550     5,659
                      --------   -------  --------   -------   --------   --------   --------    --------  --------

First Mortgage Loan:
--------------------
Prime Outlets at
 Burlington             12,331     3,694    21,370      (164)       300      3,530     21,670      25,200     3,572   1998 (A)
Prime Outlets at
 Fremont                12,830     3,250    24,096         -        247      3,250     24,343      27,593     4,010   1998 (A)
Prime Outlets at
 Kenosha                21,080     6,995    39,558       138      4,913      7,133     44,471      51,604     7,240   1998 (A)
Prime Outlets at
 Oshkosh                12,694     2,160    26,895         -        445      2,160     27,340      29,500     5,066   1998 (A)
                      --------   -------  --------   -------   --------   --------   --------    --------  --------
  Total                 58,935    16,099   111,919       (26)     5,905     16,073    117,824     133,897    19,888
                      --------   -------  --------   -------   --------   --------   --------    --------  --------

First Mortgage Loan:
--------------------
Prime Outlets at
 Hillsboro              27,283     7,121    50,894         -      1,047      7,121     51,941      59,062     8,342   1998 (A)
Prime Outlets at
 Pismo Beach            11,296     9,048    17,617         -        148      9,048     17,765      26,813     3,249   1998 (A)
Prime Outlets at
 Queenstown             16,657     4,422    35,592         -      1,533      4,422     37,125      41,547     5,045   1998 (A)
Prime Outlets at
 Tracy                  11,584     6,170    16,715         -        385      6,170     17,100      23,270     3,456   1998 (A)
                      --------   -------  --------   -------   --------   --------   --------    --------  --------
  Total                 66,820    26,761   120,818         -      3,113     26,761    123,931     150,692    20,092
                      --------   -------  --------   -------   --------   --------   --------    --------  --------

Other:
------
Prime Outlets at
 Niagara Falls USA      60,805     7,247    82,842         -    (36,612)     7,247     46,230      53,477    11,119   1997 (A)
Prime Outlets at
 Perryville              8,893     3,089    16,287         -      1,783      3,089     18,070      21,159     2,517   1998 (A)
Prime Outlets at
 San Marcos II           2,992         -         -     4,468     17,691      4,468     17,691      22,159     2,156   1999 (C)
Prime Outlets at
 Warehouse Row          22,495         -         -     1,174     26,672      1,174     26,672      27,846    15,283   1989 (C)
Prime Outlets at
 Woodbury               16,331     2,528    27,645         -    (11,039)     2,528     16,606      19,134     3,398   1998 (A)
Other Property               -         -        -      1,300      9,568      1,300      9,568      10,868     6,737   1999 (A)
                      --------   -------  --------   -------   --------   --------   --------    --------  --------
  Total                111,516    12,864   126,774     6,942      8,063     19,806    134,837     154,643    41,210
                      --------   -------  --------   -------   --------   --------   --------    --------  --------
TOTAL                 $525,983   $68,842  $525,876   $32,704   $227,441   $101,546   $753,316    $854,862  $213,604
                      ========   =======  ========   =======   ========   ========   ========    ========  ========
</TABLE>

<PAGE>
                                  Page - (F-33)

                               PRIME RETAIL, INC.
        Notes to Schedule III - Real Estate and Accumulated Depreciation
                                December 31, 2002

                                 (in thousands)

        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                    Principally term of related lease
        Furniture and equipment                5 years

The  aggregate cost for federal income tax purposes was $966,709 at December 31,
2002.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Investment in Rental Property
------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,                                                              2002                2001               2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                 <C>                <C>
Balance, beginning of year                                                      $ 1,375,608         $ 1,493,107        $ 1,826,551
Retirements                                                                          (3,815)             (7,406)            (6,281)
Improvements                                                                          7,713              16,013             51,833
Dispositions                                                                       (412,794)               (416)          (309,942)
Transfers to assets held for sale, net                                                    -             (62,664)            (4,513)
Provision for asset impairment - operating properties                               (84,093)            (63,026)           (64,541)
Provision for asset impairment - discontinued operations                            (27,757)                  -                  -
                                                                                -----------         -----------        -----------
Balance, end of year                                                            $   854,862         $ 1,375,608        $ 1,493,107
                                                                                ===========         ===========        ===========
====================================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Accumulated Depreciation
------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,                                                             2002                2001               2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                 <C>                <C>
Balance, beginning of year                                                        $ 258,124           $ 217,569          $ 183,954
Retirements                                                                          (3,815)             (7,406)            (6,281)
Other                                                                                   (23)               (387)              (818)
Dispositions                                                                        (80,156)                  -            (23,469)
Transfers to assets held for sale, net                                                    -              (8,036)            (2,672)
Depreciation expense                                                                 34,087              45,466             57,317
Depreciation expense - discontinued operations                                        5,387              10,918              9,538
                                                                                  ---------           ---------          ----------
Balance, end of year                                                              $ 213,604           $ 258,124          $ 217,569
                                                                                  =========           =========          =========
====================================================================================================================================
</TABLE>