<PAGE>







                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

     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, 1999

                                       OR

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

                         Commission file number: 0-23616

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

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

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

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

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

    Indicate by check mark  whether  the  registrant  (1) has  filed all reports
    required to be filed by Section 13  or 15(d) of the Securities  Exchange Act
    of 1934 during the preceding  12 months (or for such shorter period that the
    registrant was required to file such  reports),  and (2) has been subject to
    such filing requirements for the past 90 days.      Yes  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  $43,397,916  on April 13, 2000 (based on the
    closing  price  per  share as  reported  on the New York  Stock  Exchange  -
    Composite  Transactions).

    The number of shares of the  registrant's  Common  Stock  outstanding  as of
    March 31, 2000 was 43,397,916.

                       DOCUMENTS INCORPORATED BY REFERENCE

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

                                                                Put on Form 10-K
                                                                Into Which
                                                                Document is
Document                                                        Incorporated
--------                                                        ------------
Proxy Statement for the 2000 annual meeting of shareholders     Part III of
                                                                Form 10-K
<PAGE>







                               PRIME RETAIL, INC.

                                    Form 10-K

                                December 31, 1999

                                TABLE OF CONTENTS


                                  Part I                                    Page

Item 1. Business................... ...........................................1
Item 2. Properties................ ............................................6
Item 3. Legal Proceedings...... ..............................................13
Item 4. Submission of Matters to a Vote of Security Holders...................13

Part II

Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.14
Item 6. Selected Financial Data...............................................15
Item 7. Management's Discussion and Analysis of Financial Condition and
        Results of Operations.................................................17
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........35
Item 13.Certain Relationships and Related Transactions........................35

Part IV

Item 14.Exhibits,Financial Statement Schedules, and Reports on Form 8-K.......35

        Signatures............................................................40















<PAGE>







                                     PART I

                                ITEM 1- BUSINESS

The Company

     Prime  Retail,   Inc.  (including  its  predecessors,   collectively,   the
"Company") was organized as a Maryland corporation on July 16, 1993. The Company
commenced  operations  upon  completion  of its  initial  public  offering  (the
"Initial Public Offering") on March 22, 1994. The Company is a self-administered
and self-managed  real estate  investment trust ("REIT") and operates  primarily
within one  business  segment.  Concurrent  with the  completion  of the Initial
Public  Offering,  the Company became the general partner of Prime Retail,  L.P.
(the "Operating  Partnership") which owns interests in and provides development,
leasing,  marketing  and  management  services  for 51 outlet  centers and three
community  shopping  centers (the  "Properties")  with a total of 14,699,000 and
424,000  square  feet of gross  leasable  area  ("GLA") at  December  31,  1999,
respectively. The Properties are located throughout the United States, generally
near large metropolitan areas.

     On November 1, 1994, the Company  organized Prime Retail  Services  Limited
Partnership and Prime Retail  Services,  Inc.  (collectively  referred to as the
"Services  Corporation").  The  Services  Corporation  was formed  primarily  to
operate business lines of the Company that are not directly  associated with the
collection of rents.

     As used herein,  unless the context otherwise requires,  the term "Company"
shall mean the Company, including its predecessors,  and those entities owned or
controlled by the Company.

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

Tax Status

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

Business of the Company

     The  Company  is  engaged   primarily   in  the   ownership,   development,
construction, leasing, marketing and management of outlet centers throughout the
United States.  Outlet centers have become 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  (through  the retail
division of The Prime  Group,  Inc.  ("PGI"),  from which the  Company  acquired
certain Properties and management and development  operations),  the Company has
become the leading  developer and operator in the industry  having  developed or
acquired outlet centers containing 14,699,000 square feet of GLA at December 31,
1999,  including 22 outlet centers containing  6,626,000 square feet of GLA that
was added to our  portfolio in connection  with the  Company's  June 1998 merger
with Horizon  Group,  Inc.

     The average outlet center in the Company's portfolio contains approximately
288,000 square feet of GLA at December 31, 1999,  significantly  larger than the
industry average of approximately 195,000 square feet.
<PAGE>
     The  Company's  outlet  centers  feature a  diversified  mix of  nationally
recognized  manufacturers of designer and brand-name  merchandise with which the
Company  and  its  employees  have  established   long-standing   relationships,
including  AnnTaylor/AnnTaylor  Loft,  Bose,  Brooks  Brothers,  Corning-Revere,
Danskin,  Donna Karan, Eddie Bauer, Ellen Tracy, Esprit,  Guess?, J. Crew, Jones
New York,  Levi's/Dockers  Outlet, Mikasa,  Nautica,  Nike,  Phillips-Van Heusen
(including Bass, Gant, Geoffrey Beene, Izod and Van Heusen),  Polo/Ralph Lauren,
Reebok, Off-5th Saks Fifth Avenue, Sara Lee (including Champion,  Coach, L'eggs,
Hanes,  Bali,  Playtex,  and Socks  Galore),  Sony,  Springmaid-Wamsutta,  Tommy
Hilfiger and VF Corporation  (including  Barbizon and Vanity Fair).  As a group,
the foregoing merchants accounted for approximately 29.20% of the gross revenues
of  the  Company  during  the  year  ended   December 31,   1999,  and  occupied
approximately  34.38% of the total leased GLA contained in the Company's  outlet
centers at December 31, 1999.  During the year ended December 31, 1999, no group
of merchants  under common  control  accounted  for more than 5.09% of the gross
revenues of the Company or occupied  more than 5.69% of the total  leased GLA of
the Company at December 31, 1999.

Business Strategy

     The  Company's  objective is to enhance its funds from  operations  and the
long-term value of its outlet centers by actively managing its current portfolio
of properties.

     Active Portfolio  Management.  The Company employs the following strategies
that are  designed  to  increase  the sales and  profitability  of its  tenants,
resulting in improved occupancy levels and higher overall rental income:

     |X| Enhance  Tenant Mix. A successful  outlet  center must provide a unique
and  attractive  shopping  experience.  The  Company  seeks to offer a  superior
shopping  experience to consumers by assembling a diverse mix of nationally  and
internationally  recognized  manufacturers  and  retailers of designer and brand
name  merchandise.  The Company has  identified  certain key tenants (the "Prime
15") that it believes will enhance consumer traffic and increase tenant sales at
the Prime Outlets.  The current  "Prime 15" are Bose,  Brooks  Brothers,  Calvin
Klein,  Coach,  Donna Karan, Eddie Bauer,  Jones New York,  Levi's/Dockers,  Liz
Claiborne,  Nautica,  Nike, Polo/Ralph Lauren, Sony, The Gap and Tommy Hilfiger.
The Company  currently  leases 380 stores to the Prime 15 and actively  seeks to
increase their  representation  throughout the Prime Outlets.  In addition,  the
Company  continues  to add new tenants that  attract  customers  and enhance the
competitive position of the Prime Outlets.

     |X| Implement  Innovative  Marketing  Strategies.  During 1998, the Company
adopted a  nationwide  branding  strategy to increase  sales,  improve  customer
awareness and loyalty and promote higher traffic at its centers. As part of this
strategy,  the Company has renamed its outlet centers,  with the "Prime Outlets"
brand name.  In  addition,  the Company has  entered  into  strategic  marketing
alliances  with  companies such as Coca-Cola USA seeking to access the estimated
170 million customers at its centers.

     |X| Minimize Operating  Expenses.  The Company's  in-house  capabilities in
property  management  and leasing  reduce its  reliance  on third party  service
providers and enable it to more effectively control the expenses associated with
these functions.  The Company continually monitors its operating expenses at the
property,  regional and corporate  levels and attempts to minimize the occupancy
cost for its tenants.  Where possible,  the Company  leverages its large size to
obtain more favorable rates from its vendors and suppliers.

     Selective  Growth  and  Expansion.  The  Company  will  selectively  expand
existing  centers to the extent proposed  projects offer  attractive  investment
returns. In 1999, Prime Retail, Inc. added a total of 102,000 square feet of GLA
by expanding two of its existing centers. In addition, construction continues at
Prime Outlets of Puerto Rico, the first outlet center in Puerto Rico, which will
contain  175,000  square feet of GLA and is  scheduled to open during the second
quarter of 2000.

Competition

     The  Company's   outlet  centers  compete  for  customers   primarily  with
traditional shopping malls,  "off-price" retailers and other outlet centers. The
Company carefully  considers the degree of existing and planned competition in a
proposed market area before developing a new outlet center.  Merchants of outlet
centers  generally avoid direct  competition  with major retailers and their own
full-price stores. Generally, this is accomplished by locating outlet centers at
least 20 miles from the nearest  regional mall.  For this reason,  the Company's
outlet centers compete only to a limited extent with traditional retail malls in
or near metropolitan areas.
<PAGE>
     In addition to traditional  sources of  competition  faced by the Company's
outlet centers,  which are mentioned above, the Company's outlet centers compete
for customers  with web-based  retailers.  Because of the newness of competition
from  web-based  retailers,  it is  difficult  to  quantify  the  risk  of  such
competition to the Company.

     The  Company's  outlet  centers  compete to a limited  extent with  various
full-price and off-price retailers in the highly fragmented  retailing industry.
However,  management believes that the majority of the Company's customers visit
outlet  centers  specifically  for designer and  brand-name  goods at discounted
prices.  Traditional  full-price  and  off-price  retailers  are often unable to
provide such a variety of products at attractive prices.

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

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

Relationship with Municipalities

     Because of the favorable impact that the Company's Properties may have on a
local community's  economy by generating sales and property taxes and increasing
employment in the area, local  communities often assist the Company with respect
to zoning,  economic incentives or favorable business  development  legislation.
The Company explores  opportunities to obtain incentives from local,  county and
state governments in connection with the development of its outlet centers. Such
incentives often fund the cost of off-site sewer and water services to the site,
required  highway  improvements  and, on occasion,  the cost of land and various
on-site improvements.

Environmental Matters

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

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

Insurance

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

Employees

     As of December  31,  1999,  the Company  had 1,082  employees.  The Company
believes that its relations with its employees are satisfactory.

<PAGE>

Executive Officers

     The following table sets forth the names,  position and age (as of April 1,
2000)of the current executive officers of the Company:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Name                                 Position                                               Age
------------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                                                          <C>
Glenn D. Reschke                President and Chief Executive Officer, Director              49

David G. Phillips               Executive Vice President                                     38

Robert P. Mulreaney             Executive Vice President - Chief Financial                   41
                                  Officer and Treasurer

C. Alan Schroeder               Executive Vice President - General Counsel                   42
                                  and Secretary

Steven S. Gothelf               Executive Vice President - Finance                           40

John S. Mastin                  Executive Vice President - Leasing                           54

Frederick J. Meno               Senior Vice President - Operations                           42


====================================================================================================================================
</TABLE>
Biographies of Executive Officers

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

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

     Robert P.  Mulreaney.  Robert P.  Mulreaney is Executive  Vice  President -
Chief Financial  Officer and Treasurer of the Company.  Mr. Mulreaney joined the
Company in 1994.  Mr.  Mulreaney's  responsibilities  with the  Company  include
capital market activities,  corporate budgeting,  financial reporting,  investor
relations,  accounting,  taxation, treasury, and management information systems.
Prior to joining the Company,  Mr.  Mulreaney was  associated  for 14 years with
Ernst & Young LLP, where he  specialized  in accounting  and  consulting  issues
related to real estate and  financial  institutions.  Mr.  Mulreaney  received a
Bachelor  of  Business  Administration  in  Accounting  in  1980  from  Marshall
University.  Mr.  Mulreaney is a member of the  American  Institute of Certified
Public  Accountants,  the Maryland  Association of Certified Public Accountants,
and the West Virginia Society of Certified Public Accountants.
<PAGE>
     C. Alan Schroeder.  C. Alan Schroeder is Executive Vice President - General
Counsel and Secretary of the Company. Mr. Schroeder has been General Counsel and
Secretary  of the  Company  since the  initial  public  offering of stock in the
Company  in 1994.  From 1990 to 1994,  Mr. Schroeder  was an  Assistant  General
Counsel of PGI and was  responsible  for legal  matters  relating  to the retail
division of PGI.  Prior to joining PGI, Mr.  Schroeder was  associated  for four
years with Hopkins & Sutter,  a Chicago,  Illinois based law firm. Mr. Schroeder
received a Juris Doctorate degree from The University of Chicago Law School. Mr.
Schroeder  received an A.B.  degree in  Economics  and  Sociology  from  Bowdoin
College in  Brunswick,  Maine.  Mr.  Schroeder  is licensed  to practice  law in
Illinois.

     Steven Gothelf. Steven Gothelf is Executive Vice President - Finance of the
Company.  Mr. Gothelf  joined PGI in 1990 and,  since that time,  served as Vice
President of Asset and Development  Management.  Mr. Gothelf's  responsibilities
with the Company include financing,  capital market  activities,  and the review
and analysis of potential  outlet  center  acquisitions.  For two years prior to
joining PGI, Mr.  Gothelf was Vice  President of Finance and  Administration  of
Clarion  Development Inc. Before joining Clarion  Development  Inc., Mr. Gothelf
was a Market Maker for financial futures at the Chicago Board of Trade and prior
to that was a Manager of Real Estate Tax and  Consulting  for KPMG Peat  Marwick
LLP. Mr. Gothelf  received his B.S.  degree in Accounting from the University of
Illinois and is a certified public accountant.

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

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

Changes in Executive Officers

     Abraham Rosenthal.  Effective February 25, 2000, Abraham Rosenthal resigned
from his position as Chief Executive Officer and Director of the Company.

     R. Bruce Armiger.  Effective March 24, 2000, R. Bruce Armiger resigned from
his position as Senior Vice President - Development of the Company.

     Michael W. Reschke.  On April 5, 2000, Michael W. Reschke  relinquished his
responsibilities  as an executive officer and became  non-executive  Chairman of
the Board of the Company.


<PAGE>
                               ITEM 2 - PROPERTIES

General

     As  a   fully-integrated   real  estate  company,   the  Company   provides
development,   construction,   finance,  leasing,   accounting,   marketing  and
management  services  for all of its  properties.  At  December  31,  1999,  the
Company's portfolio  consisted of (i) 51 outlet centers  aggregating  14,699,000
square feet of GLA  (including  1,490,000  square feet of GLA at outlet  centers
owned through joint venture partnerships), (ii) three community shopping centers
aggregating  424,000  square feet of GLA and (iii) 159,000 square feet of GLA of
office space.

     The table set forth below  summarizes  certain  information with respect to
the Company's  existing centers as of December 31, 1999 (see "Note 6 - Bonds and
Notes Payable" of the Notes to the Consolidated  Financial  Statements contained
herein for  information  with respect to mortgage  indebtedness on the Company's
properties).
<TABLE>

                             Portfolio of Properties
                                December 31, 1999

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


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

Prime Outlets at Fremont (2) - Fremont, Indiana........................     I          October 1985        118,000              92
                                                                           II         November 1993         51,000             100
                                                                          III          October 1994         60,000              87
                                                                                                           -------             ---
                                                                                                           229,000              92

Prime Outlets at Birch Run (3) - Birch Run, Michigan................... I-XVI               Various        591,000              96
                                                                        XVII-
                                                                        XVIII                  1997        133,000              95
                                                                                                           -------             ---
                                                                                                           724,000              97

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

Prime Outlets at Michigan City (2) - Michigan City, Indiana............     I         November 1987        199,000             100
                                                                           II              May 1988        130,000             100
                                                                          III             July 1991         36,000              86
                                                                           IV             July 1994         42,000             100
                                                                            V         December 1994         26,000              98
                                                                           VI              May 1995         58,000              96
                                                                                                           -------             ---
                                                                                                           491,000              98

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

Prime Outlets at Kenosha (2) - Kenosha, Wisconsin......................     I        September 1988         89,000              91
                                                                           II             July 1989         65,000             100
                                                                          III              May 1990        115,000              96
                                                                                                           -------             ---
                                                                                                           269,000              95


Prime Outlets at Silverthorne (2) - Silverthorne, Colorado............      I         November 1988         95,000              99
                                                                           II         November 1990         75,000              95
                                                                          III         November 1993         88,000              83
                                                                                                           -------             ---
                                                                                                           258,000              93
</TABLE>
<PAGE>
<TABLE>

                       Portfolio of Properties (continued)
                                December 31, 1999
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Grand            GLA      Percentage
Outlet Centers                                                          Phase          Opening Date      (Sq. Ft.)       Leased(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>               <C>            <C>
Prime Outlets at Edinburgh (2) - Edinburgh, Indiana....................     I                  1988        156,000             100%
                                                                           II         November 1994        142,000             100
                                                                                                           -------             ---
                                                                                                           298,000             100

Prime Outlets at Burlington (2) - Burlington, Washington ..............     I              May 1989         89,000              86
                                                                           II          October 1989         36,000             100
                                                                          III            April 1993         49,000              97
                                                                                                           -------             ---
                                                                                                           174,000              92

Prime Outlets at Queenstown (2) - Queenstown, Maryland.................     I             June 1989         67,000             100
                                                                           II             June 1990         55,000              99
                                                                          III          January 1991         16,000              97
                                                                           IV             June 1992         14,000              97
                                                                            V           August 1993         69,000             100
                                                                                                           -------             ---
                                                                                                           221,000              99

Prime Outlets at Hillsboro (2) - Hillsboro, Texas......................     I          October 1989         95,000              92
                                                                           II          January 1992        101,000              97
                                                                          III              May 1995        163,000              94
                                                                                                           -------             ---
                                                                                                           359,000              94

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

Prime Outlets at Warehouse Row (5) - Chattanooga, Tennessee............     I         November 1989         95,000              84

Prime Outlets at Gilroy (2) - Gilroy, California.......................     I          January 1990         94,000             100
                                                                           II           August 1991        109,000              97
                                                                          III          October 1992        137,000              93
                                                                           IV             July 1994        170,000             100
                                                                            V         November 1995         69,000             100
                                                                                                           -------             ---
                                                                                                           579,000              98

Prime Outlets at Perryville (2) - Perryville, Maryland.................     I             June 1990        148,000              91

Prime Outlets at Sedona - Sedona, Arizona .............................     I           August 1990         82,000              96

Prime Outlets at San Marcos - San Marcos, Texas........................     I           August 1990        177,000              95
                                                                           II           August 1991         70,000              98
                                                                          III           August 1993        117,000              97
                                                                         IIIB         November 1994         20,000              91
                                                                         IIIC         November 1995         35,000              75
                                                                         IIID              May 1998         18,000             100
                                                                            V           August 1999         64,000             100
                                                                                                           -------             ---
                                                                                                           501,000              95

Prime Outlets at Anderson - Anderson, California.......................     I           August 1990        165,000              96

Prime Outlets at Post Falls - Post Falls, Idaho .......................     I             July 1991        111,000              75
                                                                           II             July 1992         68,000              83
                                                                                                           -------             ---
                                                                                                           179,000              78

Prime Outlets at Ellenton - Ellenton, Florida..........................     I          October 1991        187,000             100
                                                                           II           August 1993        123,000              92
                                                                          III          October 1996         30,000             100
                                                                           IV         November 1998        141,000              97
                                                                                                           -------              --
                                                                                                           481,000              97

Prime Outlets at Morrisville - Raleigh - Durham, North Carolina........     I         October 1991         181,000              95
                                                                           II            July 1996           6,000             100
                                                                                                           -------             ---
                                                                                                           187,000              95
</TABLE>

<PAGE>
<TABLE>

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



                                                                                              Grand            GLA      Percentage
Outlet Centers                                                          Phase          Opening Date      (Sq. Ft.)       Leased(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>               <C>            <C>
Prime Outlets at Naples - Naples/Marco Island, Florida.................     I        December 1991          94,000              85%
                                                                           II        December 1992          32,000             100
                                                                          III           March 1998          20,000              98
                                                                                                           -------             ---
                                                                                                           146,000              90

Prime Outlets at Conroe (2) - Conroe, Texas............................     I         January 1992          93,000              91
                                                                           II            June 1994         163,000              92
                                                                          III         October 1994          26,000              79
                                                                                                           -------             ---
                                                                                                           282,000              91

Prime Outlets at Bellport (6) - Bellport, New York.....................     I             May 1992          95,000              88
                                                                           II        November 1996         126,000              86
                                                                          III         October 1997          71,000              60
                                                                                                           -------             ---
                                                                                                           292,000              80

Prime Outlets at Niagara Falls USA - Niagara Falls, New York...........     I            July 1992         300,000              99
                                                                           II          August 1995         234,000              88
                                                                                                           -------             ---
                                                                                                           534,000              94

Prime Outlets at Woodbury (2) - Woodbury, Minnesota....................     I            July 1992         129,000              87
                                                                           II        November 1993         100,000              88
                                                                          III          August 1994          21,000             100
                                                                                                           -------             ---
                                                                                                           250,000              88

Prime Outlets at Calhoun (2) - Calhoun, Georgia........................     I         October 1992         123,000              97
                                                                           II         October 1995         131,000              94
                                                                                                           -------             ---
                                                                                                           254,000              95

Prime Outlets at Castle Rock - Castle Rock, Colorado...................     I        November 1992         181,000              98
                                                                           II          August 1993          94,000              93
                                                                          III        November 1993          95,000             100
                                                                           IV          August 1997         110,000              96
                                                                                                           -------             ---
                                                                                                           480,000              97

Prime Outlets at Bend - Bend, Oregon...................................     I        December 1992          97,000             100
                                                                           II       September 1998          35,000              99
                                                                                                           -------             ---
                                                                                                           132,000             100

Prime Outlets at Jeffersonville II (2) - Jeffersonville, Ohio..........     I           March 1993         126,000              68
                                                                           II          August 1993         123,000              52
                                                                          III         October 1994          65,000              74
                                                                                                           -------             ---
                                                                                                           314,000              63

Prime Outlets at Jeffersonville I - Jeffersonville, Ohio...............     I            July 1993         186,000              87
                                                                           II        November 1993         100,000              98
                                                                          IIB        November 1994          13,000              64
                                                                         IIIA          August 1996          35,000              97
                                                                         IIIB           March 1997          73,000             100
                                                                                                           -------             ---
                                                                                                           407,000              92

Prime Outlets at Gainesville - Gainesville, Texas......................     I          August 1993         210,000              86
                                                                           II        November 1994         106,000              88
                                                                                                           -------             ---
                                                                                                           316,000              87

Prime Outlets at Loveland - Loveland, Colorado.........................     I             May 1994         139,000              99
                                                                           II        November 1994          50,000              88
                                                                          III             May 1995         114,000              91
                                                                           IV             May 1996          25,000             100
                                                                                                           -------             ---
                                                                                                           328,000              95
</TABLE>
<PAGE>
<TABLE>

                       Portfolio of Properties (continued)
                                December 31, 1999
------------------------------------------------------------------------------------------------------------------------------------

                                                                                              Grand            GLA      Percentage
Outlet Centers                                                          Phase          Opening Date      (Sq. Ft.)       Leased(1)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>            <C>               <C>            <C>
Prime Outlets at Oxnard (7) - Oxnard, California.......................     I             June 1994        148,000              92%

Prime Outlets at Grove City - Grove City, Pennsylvania.................     I           August 1994        235,000              97
                                                                           II         November 1994         95,000             100
                                                                          III         November 1995         85,000              96
                                                                           IV         November 1996        118,000              99
                                                                                                           -------             ---
                                                                                                           533,000              98

Prime Outlets at Huntley - Huntley, Illinois...........................     I           August 1994        192,000              93
                                                                           II         November 1995         90,000              76
                                                                                                           -------             ---
                                                                                                           282,000              88

Prime Outlets at Florida City - Florida City, Florida..................     I        September 1994        208,000              83

Prime Outlets at Pismo Beach (2) - Pismo Beach, California.............     I         November 1994        148,000              94

Prime Outlets at Tracy  (2) - Tracy, California........................     I         November 1994        153,000              92

Prime Outlets at Vero Beach (2) - Vero Beach, Florida..................     I         November 1994        210,000              95
                                                                           II           August 1995        116,000              94
                                                                                                           -------             ---
                                                                                                           326,000              94

Prime Outlets at Waterloo (2) - Waterloo, New York.....................     I            March 1995        208,000              99
                                                                           II        September 1996        115,000              95
                                                                          III            April 1997         68,000              94
                                                                                                           -------             ---
                                                                                                           391,000              97

Prime Outlets at Odessa - Odessa, Missouri.............................     I             July 1995        191,000              90
                                                                           II         November 1996        105,000              58
                                                                                                           -------             ---
                                                                                                           296,000              79

Prime Outlets at Darien (8) - Darien, Georgia..........................     I             July 1995        238,000              88
                                                                          IIA         November 1995         49,000              99
                                                                          IIB             July 1996         20,000             100
                                                                                                           -------             ---
                                                                                                           307,000              90

Prime Outlets at New River (7) - Phoenix, Arizona......................     I        September 1995        217,000              97
                                                                           II        September 1996        109,000              90
                                                                                                           -------             ---
                                                                                                           326,000              94

Prime Outlets at Gulfport (9) - Gulfport, Mississippi..................     I         November 1995        228,000              91
                                                                          IIA         November 1996         40,000              78
                                                                          IIB         November 1997         38,000              64
                                                                                                           -------             ---
                                                                                                           306,000              86

Prime Outlets at Lodi - Burbank, Ohio..................................     I         November 1996        205,000              98
                                                                          IIA              May 1998         33,000              92
                                                                          IIB         November 1998         75,000              83
                                                                                                           -------             ---
                                                                                                           313,000              94

Prime Outlets at Gaffney - Gaffney, South Carolina.....................     I         November 1996        235,000              92
                                                                           II             July 1998         70,000              92
                                                                                                           -------             ---
                                                                                                           305,000              92

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

Prime Outlets at Lebanon -  Lebanon, Tennessee.........................     I            April 1998        208,000              95
                                                                          IIA            March 1999         21,000              79
                                                                                                           -------             ---
                                                                                                           229,000              93

Prime Outlets at Hagerstown (10) - Hagerstown, Maryland................     I           August 1998        218,000             100
                                                                           II         November 1998        103,000             100
                                                                                                           -------             ---
                                                                                                           321,000             100
                                                                                                           -------             ---

Total Outlet Centers (11)                                                                               14,699,000              93%
                                                                                                        ==========             ===
====================================================================================================================================

</TABLE>

Notes:
(1)  Percentage  reflects  fully  executed  leases as of December  31, 1999 as a
     percent of square feet of GLA.
(2)  The Company acquired this outlet center on June 15, 1998 as a result of its
     merger with Horizon Group, Inc.
(3)  The Company acquired this outlet center on June 15, 1998 as a result of its
     merger with Horizon Group, Inc. On November 19, 1999, the Company sold this
     outlet center to a joint  venture  partnership  with an unrelated  party in
     which the Company owns a 30.0% interest.
(4)  The Company acquired this outlet center on June 15, 1998 as a result of its
     merger with Horizon Group, Inc. On February 23, 2000, the Company sold this
     outlet center to a joint  venture  partnership  with an unrelated  party in
     which the Company owns a 30.0% interest.
(5)  The Company owns a 2% partnership  interest as the sole general  partner in
     Phase I of this property but is entitled to 99% of the property's operating
     cash  flow and net  proceeds  from a sale or  refinancing.  This  mixed-use
     development  includes  154,000  square  feet of office  space which was 98%
     leased as of December 31, 1999.
(6)  On September 1, 1999, the Company acquired 50% of Phase I and 51% of Phases
     II  and  III  of  this  outlet  center  which  it  owns  in  joint  venture
     partnerships with unrelated parties.
(7)  The Company owns 50% of this outlet center in a joint  venture  partnership
     with an unrelated third party.
(8)  The Company  operates  this outlet  center  pursuant to a long-term  ground
     lease under  which the  Company  receives  the  economic  benefit of a 100%
     ownership interest.
(9)  The real  property on which this  outlet  center is located is subject to a
     long-term ground lease.
(10) The Company  expects to close on the sale of this outlet center on or about
     May 15, 2000 to a joint  venture  partnership  with an  unrelated  party in
     which the Company owns a 30.0% interest.
(11) The Company  also owns three  community  centers not included in this table
     containing 424,000 square feet of GLA in the aggregate that were 84% leased
     as of December 31, 1999.

Lease Terms

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

     The  following  table sets forth,  as of December  31,  1999,  tenant lease
expirations for the next 10 years at the Company's outlet centers (assuming that
none of the  tenants  exercise  any  renewal  option  and  including  leases  at
outlet centers owned through joint venture partnerships):
<TABLE>

------------------------------------------------------------------------------------------------------------------------------------
                       Lease Expirations - Outlet Centers

<CAPTION>                                                                           % of Total                       Annualized
                        Number of                    Approximate                    Annualized                      Minimum Rent
                         Leases                          GLA                     Minimum Rent of                    Represented by
 Year                    Expiring                     (Sq. Ft.)                  Expiring Leases                   Expiring Leases
------                -------------                ----------------           --------------------                 ---------------
<S>                     <C>                          <C>                         <C>                               <C>
 2000                      665                        2,270,809                       $33,256,178                          17.41%
 2001                      654                        2,393,027                        36,672,692                          19.20
 2002                      605                        2,225,248                        36,033,566                          18.86
 2003                      557                        2,350,330                        36,200,598                          18.95
 2004                      359                        1,449,052                        23,785,980                          12.45
 2005                      136                          782,286                        11,757,734                           6.16
 2006                       62                          433,394                         5,828,693                           3.05
 2007                       29                          171,763                         2,261,173                           1.18
 2008                       33                          204,171                         3,221,453                           1.69
 2009                       -                                 -                                -                              -


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

<PAGE>

Tenants

     In management's  view,  tenant mix is an important factor in determining an
outlet center's success.  Virtually all aspects of the Company's outlet centers,
ranging from site selection to architectural  design, are planned to attract and
retain a diverse mix of nationally and internationally  recognized manufacturers
of upscale designer and brand-name products. Crucial to the development of a new
outlet center is having lead tenants committed to the outlet center early in the
process.  In management's  view, lead tenants are manufacturers  that during the
development of an outlet center attract other high-quality  manufacturers to the
outlet center and provide for a  well-balanced  and  diversified  mix of tenants
that will  attract  consumers to the outlet  center.  Lead tenants are placed in
strategic  locations  designed to draw  customers  into the outlet center and to
encourage them to shop at more than one store. The Company continually  examines
the  placement  of tenants  within each center  and, in  collaboration  with its
tenants,  adjusts the size and  location of their space  within the center in an
effort to improve sales per square foot.

     During the year ended  December 31, 1999,  no group of tenants under common
control  accounted  for more than 5.09% of the gross  revenues of the Company or
occupied more than 5.12% of the total GLA of the Company.

     The  following  list  includes  some of the lead  tenants in the  Company's
outlet centers based on leases executed as of December 31, 1999:

<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>


                                                                                          NUMBER OF                     % OF LEASED
                                                                                            STORES                          GLA
    TENANT                                                                                --------                      ----------
    ------
<S>                                                                                        <C>                          <C>
PHILLIPS-VAN HEUSEN
     BASS ......................................................................              49                            2.62%
     VAN HEUSEN ................................................................              49                            1.57
     GEOFFREY BEENE ............................................................              32                            1.02
     IZOD ......................................................................              28                            0.46
     GANT ......................................................................               1                            0.02
                                                                                             ---                            ----
        SUBTOTAL PHILLIPS-VAN HEUSEN............................................             159                            5.69

DRESS BARN, INC.
     WESTPORT, LTD./WESTPORT WOMAN/DRESS BARN...................................              48                            2.53
     SBX........................................................................               2                            0.07
                                                                                             ---                            ----
        SUBTOTAL DRESS BARN, INC................................................              50                            2.60

NIKE............................................................................              28                            2.57
LEVI'S/DOCKERS..................................................................              40                            2.52
LIZ CLAIBORNE/ELISABETH.........................................................              43                            2.52
GAP/OLD NAVY....................................................................              31                            2.23

CASUAL CORNER GROUP, INC.
     CASUAL CORNER OUTLET.......................................................              35                            1.48
     PETITE SOPHISTICATE .......................................................              20                            0.38
     CASUAL CORNER WOMAN........................................................              14                            0.33
                                                                                             ---                            ----
        SUBTOTAL CASUAL CORNER GROUP, INC. .....................................              69                            2.19

MIKASA..........................................................................              37                            2.18

BROWN GROUP RETAIL, INC.
     FACTORY BRAND SHOES........................................................              34                            1.33
     NATURALIZER................................................................              27                            0.53
     FAMOUS FOOTWEAR...........................................................                6                            0.26
                                                                                             ---                            ----
        SUBTOTAL BROWN GROUP....................................................              67                            2.12

REEBOK/ROCKPORT.................................................................              30                            1.95

SARA LEE
    L'EGGS/HANES/BALI/PLAYTEX...................................................              42                            1.42
    COACH.......................................................................              17                            0.37
    CHAMPION....................................................................               1                            0.02
    SOCKS GALORE................................................................              13                            0.13
                                                                                             ---                            ----
        SUBTOTAL SARA LEE.......................................................              73                            1.94

VANITY FAIR/LEE/WRANGLER/BARBIZON...............................................              10                            1.83

</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                                                                          NUMBER OF                     % OF LEASED
      TENANT                                                                               STORES                            GLA
      ------                                                                             ----------                      ----------
 <S>                                                                              <C>                           <C>
BUGLE BOY.......................................................................              41                            1.68%
SPIEGEL.........................................................................               8                            1.68
JONES NEW YORK..................................................................              61                            1.63
POLO/RALPH LAUREN...............................................................              29                            1.57
NINE WEST.......................................................................              73                            1.56
CORNING-REVERE..................................................................              40                            1.46
OSHKOSH B'GOSH/GENUINE KIDS.....................................................              37                            1.43
SPRINGMAID-WAMSUTTA.............................................................              23                            1.26
CARTERS.........................................................................              33                            1.22
EDDIE BAUER.....................................................................              19                            1.14
K*B TOY.........................................................................              31                            1.13
OFF 5TH-SAKS FIFTH AVENUE.......................................................               7                            1.08
FAMOUS BRANDS HOUSEWARES........................................................              37                            1.03
SAMSONITE/AMERICAN TOURISTER....................................................              44                            1.02
FOREMAN ENTERPRISES, INC.
     AMERICAN OUTPOST...........................................................              27                            0.83
     FARAH/SAVANE/FARGO.........................................................               6                            0.11
                                                                                             ---                            ----
        SUBTOTAL FOREMAN ENTERPRISES, INC.......................................              33                            0.94

RUE 21..........................................................................              33                            0.90
BIG DOG SPORTSWEAR..............................................................              40                            0.89
TOMMY HILFIGER/WOMAN/JEANS......................................................              28                            0.88
PAPER FACTORY/GREETINS 'N MORE..................................................              35                            0.88
KITCHEN COLLECTION..............................................................              35                            0.87
JOCKEY..........................................................................              31                            0.85
WELCOME HOME....................................................................              40                            0.85
J. CREW.........................................................................              16                            0.83
BROOKS BROTHERS.................................................................              20                            0.83
ANN TAYLOR......................................................................              13                            0.78
NAUTICA.........................................................................              24                            0.68
BOSE............................................................................              16                            0.48
DONNA KARAN.....................................................................              11                            0.36
SONY............................................................................               7                            0.31
                                                                                           -----                           -----
TOTAL...........................................................................           1,502                           60.56%
                                                                                           =====                           =====


====================================================================================================================================
</TABLE>
     During  the year  ended  December  31,  1999,  total bad debt  expense  was
approximately $0.8 million or 0.25% of total revenues.

<PAGE>

                           ITEM 3 - LEGAL PROCEEDINGS

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

     The Company and its  affiliates are defendants in a lawsuit filed on August
10, 1999 in the Circuit  Court for Baltimore  City and removed to U.S.  District
Court for the District of Maryland on August 20, 1999. The lawsuit  alleges that
the  Company  and its  related  entities  overcharged  tenants  for common  area
maintenance  charges  and  promotional  fund  charges.  The  outcome of, and the
ultimate  liability of the Company,  if any, from, this lawsuit cannot currently
be  predicted.  Management  believes  that the  Company has acted  properly  and
intends to defend this lawsuit vigorously.

     The New York Stock  Exchange  ("NYSE")  has notified the Company that it is
reviewing  transactions  in the  stock of the  Company  prior  to the  Company's
January 18, 2000 press release concerning financial matters.

           ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security  holders during the quarter
ended December 31, 1999.


<PAGE>

                                     PART II

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

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

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

      Market Price of Common Stock and Cash Dividends Paid Per Common Share
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
                                                1999                                                   1998
                           -------------------------------------------------    ----------------------------------------------------
                             Fourth        Third       Second        First       Fourth          Third        Second          First
                            Quarter      Quarter      Quarter      Quarter      Quarter        Quarter       Quarter        Quarter
                           -------------------------------------------------    ----------------------------------------------------
<S>                         <C>          <C>          <C>          <C>          <C>            <C>           <C>            <C>
Market price per
 common share:
   High..................     $7.94        $8.94        $9.94       $10.19       $11.13         $12.81        $15.19         $15.56
   Low...................      5.13         6.44         7.94         7.38         7.50           9.06         11.81          13.75
   End of period close...      5.63         7.38         8.69         8.75         9.81           9.81         11.94          14.94

Cash dividends paid per
   common share..........    $0.295       $0.295       $0.295       $0.295       $0.295         $0.295        $0.795 (1)     $0.295

====================================================================================================================================
</TABLE>
Note:
(1)  Includes a special cash  distribution of $0.50 per common share relating to
     the  Company's  merger with  Horizon  completed  in June 1998 (see Note 3 -
     "Business Combination" of the Notes to Consolidated Financial Statements).

     The  Company's  current  policy  regarding  the  payment  of  common  stock
distributions is to only make  distributions to the extent necessary to maintain
its status as a real estate  investment  trust for federal  income tax purposes.
Based on its current  federal tax income tax  projections,  the Company does not
expect to pay any  distributions  on its common stock or common units of limited
partnership  interest  in Prime  Retail,  L.P.  during  2000.  With  respect  to
distributions on the Company's 10.5% Series A Senior Cumulative  Preferred Stock
and 8.5% Series B Cumulative Convertible Preferred Stock, the Board of Directors
considered and did not declare a quarterly  distribution on such preferred stock
due  February 15,  2000.  The  Company's  Board of  Directors  will  continue to
evaluate the payment of such preferred stock distributions on a quarterly basis.

     The Company is currently prohibited under the terms of more than one of its
credit  agreements  from  paying  dividends  or  distributions  as a  result  of
non-compliance with a financial covenant (see Note 6 - "Bonds and Notes Payable"
of the Notes to Consolidated Financial Statements.  In addition, the Company may
make no  distribution  to its  common  shareholders  unless it is  current  with
respect to distributions to its preferred shareholders.

     The  approximate  number of holders  of record of the Common  Stock was 949
including participants in security position listings as of March 28, 2000.


<PAGE>
                        ITEM 6 - SELECTED FINANCIAL DATA
                (Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------
                                                                   Years ended December 31
                                          ----------------------------------------------------------------------------
                                                   1999           1998           1997          1996           1995
----------------------------------------------------------------------------------------------------------------------
<S>                                           <C>           <C>             <C>            <C>            <C>
Revenues
Base rents...............................     $ 193,979     $  148,376      $  78,046      $  54,710      $  46,368
Percentage rents.........................         8,085          6,384          3,277          1,987          1,520
Tenant reimbursements....................        90,063         67,152         37,519         25,254         22,283
Interest and other.......................        13,829          9,897         10,288          7,089          7,227
                                                -------        -------        --------        ------         ------
           Total revenues................       305,956        231,809        129,130         89,040         77,398

Expenses
Property operating.......................        70,862         52,684         29,492         20,421         17,389
Real estate taxes........................        22,405         16,705          9,417          5,288          4,977
Depreciation and amortization............        73,640         52,727         26,715         19,256         15,438
Corporate general and administrative.....        12,687          7,980          5,603          4,018          3,878
Interest.................................        93,934         60,704         36,122         24,485         20,821
Provision for abandoned projects.........        16,039              -              -              -              -
Provision for asset impairment...........        15,842              -              -              -              -
Loss on Designer Connection..............         6,561          1,067              -              -              -
Other charges............................         6,918          4,495          3,234          8,586          2,089
                                                -------        -------        -------         ------        -------
           Total expenses................       318,888        196,362        110,583         82,054         64,592
                                                -------        -------        -------         ------        -------
Income (loss) before loss on sale of real
   estate, minority interests and
   extraordinary loss....................       (12,932)        35,447         18,547          6,986         12,806
Loss on sale of real estate..............       (15,153)       (15,461)             -              -              -
                                                -------        -------        -------         ------        -------
Income (loss) before minority interests
   and extraordinary loss................       (28,085)        19,986         18,547          6,986         12,806
(Income) loss allocated to minority
   interests.............................        (3,226)        (2,456)       (10,581)         2,092          5,364
                                                -------         ------         -------        ------        -------
Income (loss) before extraordinary loss..       (31,311)        17,530          7,966          9,078         18,170
Extraordinary loss.......................        (3,518)             -         (2,061)        (1,017)             -
                                               --------      ---------       ---------      ---------       --------
Net income (loss)........................       (34,829)        17,530          5,905          8,061         18,170
Income allocated to preferred shareholders       (9,962)       (24,604)       (12,726)       (14,236)       (20,944)
                                               --------      ---------       ---------      ---------       --------
Net loss applicable to common shares.....    $  (44,791)    $   (7,074)    $   (6,821)    $   (6,175)     $  (2,774)
                                               ========      =========       =========      =========       ========
Net loss per common share - basic........    $    (1.04)     $   (0.20)     $   (0.36)    $    (0.75)     $   (0.96)
                                               ========      =========       =========      =========      =========
Net loss per common share - diluted......    $    (1.30)     $   (0.20)     $   (0.36)    $    (0.75)     $   (0.96)
                                               ========      =========       =========      =========      =========
Other Data
Funds from operations (1)................    $   68,321     $   90,020     $   46,718     $   27,637      $  27,996
Net cash provided by operating activities    $  102,221     $   61,335     $   49,856     $   45,191      $  36,399
Net cash used in investing activities....    $  (56,666)    $ (145,596)    $ (229,956)    $ (232,290)     $ (81,978)
Net cash provided by (used in) financing
   activities............................    $  (43,977)    $   83,653     $  182,549     $  176,096      $  57,547
Distributions declared per common share..    $     0.89     $     1.68(2)  $     1.18     $     1.33(3)   $    1.18
Reported merchant sales..................    $3,286,917     $3,169,268     $1,434,163     $1,044,348      $ 809,623
Total outlet GLA at end of period (4)....        14,699         14,348          7,217          5,780          4,331
Number of outlet centers at end of
period(4)................................            51             50             28             21             17
</TABLE>
<TABLE>

<CAPTION>

                                                                         December 31
                                          ----------------------------------------------------------------------------
                                                 1999           1998           1997           1996             1995
----------------------------------------------------------------------------------------------------------------------
<S>                                          <C>          <C>              <C>            <C>             <C>
Balance Sheet Data
Rental property (before accumulated
   depreciation).........................    $1,826,551   $2,015,722       $904,782       $640,759         $454,480
Net investment in rental property........     1,642,597    1,887,975        822,749        583,085          414,290
Total assets.............................     1,856,058    1,976,464        904,183        666,803          462,405
Bonds and notes payable..................     1,260,670    1,217,507        515,265        499,523          305,954
Total liabilities and minority interests.     1,359,371    1,332,730        559,655        527,594          340,921
Shareholders' equity.....................       496,687      643,734        344,528        139,209          121,484

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


<PAGE>

Notes:
(1)  Management  believes that in order to facilitate a clear  understanding  of
     the consolidated  historical  operating results of the Company,  Funds from
     Operations  ("FFO")  should be  considered in  conjunction  with net income
     (loss) as presented  in the  financial  statements  included in this Annual
     Report on Form  10-K.  Management  believes  that FFO is an  important  and
     widely  accepted  measure  of the  operating  performance  of  REITs  which
     provides a relevant basis for comparison to other REITS. Therefore,  FFO is
     presented to assist  investors in analyzing the performance of the Company.
     FFO  represents  net income (loss)  (computed in accordance  with generally
     accepted  accounting  principles  ("GAAP"),  excluding gains or losses from
     debt  restructuring,  sales of property and discontinued  operations,  plus
     depreciation  and  amortization  and after  adjustments for  unconsolidated
     investment  partnerships  and joint  ventures.  In March 1995, the National
     Association  of  Real  Estate   Investment   Trusts   ("NAREIT")  issued  a
     clarification  of its  definition of FFO.  Although the Company has adopted
     the NAREIT  definition of FFO, the Company cautions that the calculation of
     FFO may vary from entity to entity and as such the  presentation  of FFO by
     the Company may not be comparable  to other  similarly  titled  measures of
     other reporting companies.  FFO does not represent cash flow from operating
     activities in accordance  with GAAP and is not indicative of cash available
     to fund all of the Company's cash needs. FFO should not be considered as an
     alternative  to net income or any other GAAP  measure  as an  indicator  of
     performance  and should not be considered as an alternative to cash flow as
     a measure of liquidity or the ability to service debt or to pay  dividends.
     A reconciliation of income (loss) before  allocations to minority interests
     and preferred shareholders to FFO is as follows:

<TABLE>
<CAPTION>
                                                                                          Years ended December 31
                                                               ---------------------------------------------------------------------
                                                                   1999          1998           1997            1996          1995
  ----------------------------------------------------------------------------------------------------------------------------------
  <S>                                                          <C>             <C>           <C>             <C>           <C>
  Income (loss) before minority interests and
    Extraordinary loss (i), (ii).......................        $(28,085)       $19,986       $18,547         $ 6,986       $12,806
  FFO adjustments:
  Loss on sale of real estate..........................          15,153         15,461             -               -             -
  Discontinued operations - Designer Connection........           6,561          1,067             -               -             -
  Real estate depreciation and amortization............          73,053         52,295        26,413          18,703        14,884
  Unconsolidated joint venture.........................
     adjustments(ii)...................................           1,639          1,211         1,758           1,948           306
  FFO before allocations to minority interests and             --------        -------       -------         -------       -------
     preferred shareholders............................        $ 68,321        $90,020       $46,718         $27,637       $27,996
                                                               ========        =======       =======         =======       =======

  ==================================================================================================================================
 </TABLE>
     Notes:
    (i) Includes  a  nonrecurring  charge  of  $6,131  related to the prepayment
        of long-term debt recorded during 1996.
    (ii)Amounts include net  preferential  partner  distributions  from  a joint
        venture partnership of $400 and $162 for  the  years  ended December 31,
        1996 and 1995, respectively.

(2)  Includes a special cash  distribution of $0.50 per common share relating to
     the  Company's  merger with  Horizon  completed  in June 1998 (see Note 3 -
     "Business Combination" of the Notes to Consolidated Financial Statements).
(3)  Includes a special cash distribution of $0.145 per common share relating to
     the Company's exchange offer completed in June 1996.
(4)  Includes  outlet  centers  operated under joint venture  partnerships  with
     unrelated third parties as follows:

<TABLE>
<CAPTION>                                                                                  December 31
                                                            ------------------------------------------------------------------------
                                                                   1999          1998           1997            1996          1995
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>           <C>            <C>             <C>           <C>


Aggregate GLA........................................             1,490           595            595             800           901
Number of outlet centers.............................                 4             3              3               4             4

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


<PAGE>

                ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Introduction

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

Cautionary Statements

     The  following  discussion  in  "Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations" contains certain  forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 which reflect  management's current views with respect to future events and
financial  performance.  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 that the Company may be unable to obtain
waivers  or  amendments  to the  provisions  of its credit  agreement  sthat are
presently in default or to refinance  the  indebtedness  outstanding  under such
agreements  in the event they are  accelerated;  the effects of future events on
the Company's  financial  performance;  risks related to the retail  industry in
which the Company's  outlet  centers  compete,  including the potential  adverse
impact of external factors, such as inflation, consumer confidence, unemployment
rates and consumer tastes and  preferences;  risks associated with the Company's
planned asset sales;  risks associated with the Company's  property  development
activities,  such as the  potential  for cost  overruns,  delays and the lack of
predictability  with  respect to the  financial  returns  associated  with these
development activities;  the risk of potential increase in market interest rates
from current levels;  risks associated with real estate  ownership,  such as the
potential  adverse impact of changes in local  economic  climate on the revenues
and the value of the Company's properties; risks associated with litigation; and
risks associated with newly arising competition from web-based retailers,  given
the newness of web-based retailing, it is difficult to quantify at this time.

Merger with Horizon Group, Inc.

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

Portfolio Growth

     The  Company  grew to its present  size,  a process  that had been  largely
completed by the end of 1999, by developing  and  acquiring  outlet  centers and
expanding its existing outlet centers.  The Company's outlet portfolio consisted
of 51 outlet  centers  totaling  14,699,000  square feet of gross  leasable area
("GLA") at December 31, 1999,  compared to 50 outlet centers totaling 14,348,000
square feet of GLA at December 31, 1998 and 28 outlet centers totaling 7,217,000
square feet of GLA at December 31, 1997. The significant  increase in the number
of the  Company's  outlet  centes and GLA are  collectively  referred  to as the
"Portfolio Expansion and the Horizon Merger."

     During  1999,  the Company  (i) opened two  expansions  to existing  outlet
centers  totaling 85,000 square feet of GLA and (ii) acquired from Horizon Group
Properties, Inc. ("HGP") ownership interests in the Bellport Outlet Center which
consists of 292,000  square feet of GLA.  During  1998,  the Company  opened two
outlet centers and nine expansions to existing outlet centers  totaling  931,000
square feet of GLA in the aggregate. In connection with the Merger Transactions,
the Company (i) acquired and integrated 22 of Horizon's  outlet centers into its
existing portfolio adding 6,626,000 square feet of GLA in the aggregate and (ii)
sold two outlet centers to HGP totaling 426,000 square feet of GLA.

<PAGE>

<TABLE>
<CAPTION>
Results of Operations

Table 1-Consolidated Statements of Operations

------------------------------------------------------------------------------------------------------------------------------------
Years ended December 31,                                                                    1999            1998             1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                         <C>             <C>              <C>
 Revenues

 Base rents.....................................................................        $193,979       $ 148,376         $ 78,046
 Percentage rents...............................................................           8,085           6,384            3,277
 Tenant reimbursements..........................................................          90,063          67,152           37,519
 Interest and other.............................................................          13,829           9,897           10,288
                                                                                         -------         -------          -------
   Total revenues...............................................................         305,956         231,809          129,130

 Expenses

 Property operating.............................................................          70,862          52,684           29,492
 Real estate taxes..............................................................          22,405          16,705            9,417
 Depreciation and amortization..................................................          73,640          52,727           26,715
 Corporate general and administrative...........................................          12,687           7,980            5,603
 Interest.......................................................................          93,934          60,704           36,122
 Provision for abandoned projects...............................................          16,039               -                -
 Provision for asset impairment.................................................          15,842               -                -
 Loss on Designer Connection....................................................           6,561           1,067                -
 Other charges..................................................................           6,918           4,495            3,234
                                                                                         -------         -------          -------
    Total expenses..............................................................         318,888         196,362          110,583
                                                                                         -------         -------          -------
 Income (loss) before loss on sale of real estate, minority interests and
   extraordinary loss...........................................................         (12,932)         35,447           18,547
 Loss on sale of real estate....................................................         (15,153)        (15,461)               -
                                                                                         -------         -------          -------
 Income (loss) before minority interests and extraordinary loss.................         (28,085)         19,986           18,547
 Income allocated to minority interests.........................................          (3,226)         (2,456)         (10,581)
                                                                                         -------         -------          -------
 Income (loss) before extraordinary loss........................................         (31,311)         17,530            7,966
 Extraordinary loss on early extinguishment of debt,
   net of minority interests in the amount of $887 in 1999 and $0 in 1997.......          (3,518)              -           (2,061)
                                                                                        --------        --------         --------
 Net income (loss)..............................................................         (34,829)         17,530            5,905
 Income allocated to preferred shareholders.....................................          (9,962)        (24,604)         (12,726)
                                                                                        --------        --------         --------
 Net loss applicable to common shares...........................................        $(44,791)       $ (7,074)        $ (6,821)
                                                                                        ========        ========         ========
 Earnings per common share - basic:
    Loss before extraordinary loss..............................................        $  (0.96)       $  (0.20)        $  (0.25)
    Extraordinary loss..........................................................           (0.08)              -            (0.11)
                                                                                        --------        --------         --------
    Net loss....................................................................        $  (1.04)       $  (0.20)        $  (0.36)
                                                                                        ========        ========         ========

 Earnings per common share - diluted
    Loss before extraordinary loss..............................................        $  (1.22)       $  (0.20)        $  (0.25)
    Extraordinary loss..........................................................           (0.08)              -            (0.11)
                                                                                        ========        ========         ========
    Net loss....................................................................        $  (1.30)       $  (0.20)        $  (0.36)
                                                                                        ========        ========         ========
 Weighted average common shares outstanding
     Basic......................................................................          43,196          35,612           19,189
                                                                                        ========        ========         ========
     Diluted....................................................................          44,260          35,612           19,189
                                                                                        ========        ========         ========

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


<PAGE>

Table 2-Statements of Operations on a Weighted Average per Square Foot Basis

     A summary of the operating  results for the years ended  December 31, 1999,
1998  and  1997 is  presented  in the  following  table,  expressed  in  amounts
calculated on a weighted average occupied GLA basis.
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
Years ended December 31,                                                                      1999           1998            1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>            <C>             <C>

GLA at end of period (1)........................................................           13,787         14,457            7,326
Weighted average occupied GLA (1)...............................................           13,599         10,390            5,735
Executed leases at end of period (GLA) (1)......................................           13,643         13,894            6,854
Outlet centers in operation at end of period (2)................................               51             50               28
New Outlet centers opened and acquired (2)......................................                1             24                7
Outlet centers expanded (2).....................................................                2              9                4
Community centers in operation at end of period.................................                3              3                3
States operated in at end of period.............................................               26             26               20

Portfolio weighted average per square foot (3):

Revenues
Base rents......................................................................           $14.26         $14.28           $13.61
Percentage rents................................................................             0.59           0.61             0.57
Tenant reimbursements...........................................................             6.62           6.46             6.54
Interest and other..............................................................             1.02           1.06             1.79
                                                                                           ------         ------           ------
   Total revenues...............................................................            22.49          22.41            22.51

Expenses (4)
Property operating..............................................................             5.21           5.07             5.14
Real estate taxes...............................................................             1.65           1.61             1.64
Depreciation and amortization...................................................             5.42           5.10             4.66
Corporate general and administrative............................................             0.93           0.77             0.98
Interest........................................................................             6.91           5.84             6.30
Other charges...................................................................             0.51           0.63             0.56
                                                                                           ------         ------           ------
   Total expenses...............................................................            20.63          19.02            19.28
                                                                                           ------         ------           ------
Income before loss on sale of real estate, minority interests
   and extraordinary loss.......................................................           $ 1.86         $ 3.39           $ 3.23
                                                                                           ======         ======           ======
Revenues
Base rents......................................................................           $14.51         $14.66           $14.19
Percentage rents................................................................             0.62           0.68             0.63
Tenant reimbursements...........................................................             6.76           6.67             6.96
Interest and other..............................................................             0.85           0.85             1.57
                                                                                           ------         ------           ------
   Total revenues...............................................................            22.74          22.86            23.35

Expenses (4)
Property operating..............................................................             5.31           5.17             5.40
Real estate taxes...............................................................             1.65           1.62             1.67
Depreciation and amortization...................................................             5.53           5.09             4.67
Interest........................................................................             6.42           5.95             6.31
Other charges...................................................................             0.26           0.33             0.43
                                                                                           ------         ------           ------
   Total expenses...............................................................            19.17          18.16            18.48
                                                                                           ------         ------           ------
Income before corporate general and administrative expenses,
   loss on sale of real estate, minority interests and extraordinary loss.......           $ 3.57         $ 4.70           $ 4.87
                                                                                           ======         ======           ======



===================================================================================================================================
</TABLE>
Notes:
(1)  Includes total GLA in which the Company receives  substantially  all of
     the economic benefit.
(2)  Includes  outlet  centers  operated  under   unconsolidated  joint  venture
     partnerships with unrelated third parties.
(3)  Based on occupied GLA weighted by months of operation.  The occupied GLA on
     a weighted  average basis from the 22 properties the Company  acquired from
     Horizon have been included in the weighted  average GLA  commencing on June
     15, 1998.
(4)  Excludes  a (i)  provision  for  abandoned  projects  of  $16,039,  (ii)  a
     provision  for asset  impairment  of $15,842,  and (iii) a loss on Designer
     Connection outlet stores of $6,561 recorded during 1999.


<PAGE>

     Comparison of the year ended  December 31, 1999 to the year ended  December
31, 1998

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

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

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

     As summarized in TABLE 3, merchant sales reported to the Company  increased
by $117.6 million,  or 3.7%, to $3,286.9  million from $3,169.3  million for the
years ended  December  31, 1999 and 1998,  respectively.  The  increase in total
reported  merchant  sales is primarily  due to the  Portfolio  Expansion and the
Horizon Merger.  The weighted  average  reported  merchant sales per square foot
increased  by 0.8% to $256.50  per square  foot in 1999 from  $254.56 per square
foot in 1998. Total merchant  occupancy cost per square foot increased  slightly
from $21.30 in 1998 to $21.90 in 1999 and  increased as a percentage of reported
sales from 8.37% to 8.54%, respectively.

Table 3-Summary of Reported Merchant Sales(1)

     A summary of reported outlet merchant sales and related data for 1999, 1998
and 1997 follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years ended December 31,                                                                             1999        1998        1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                              <C>         <C>          <C>
Total reported merchant sales (in millions)(1).................................                  $3,286.9    $3,169.3     $1,434.2
                                                                                                 ========    ========     ========
Weighted average reported merchant sales per square foot(2):
    All store sales.............................................................                 $ 256.50    $ 254.56     $ 236.20
                                                                                                 ========    ========     ========
    Same-space sales............................................................                 $ 252.65    $ 248.44
                                                                                                 ========    ========
Total merchant occupancy cost per square foot(3)................................                 $  21.90    $  21.30     $  21.36
                                                                                                 ========    ========     ========
Cost of merchant occupancy to reported sales(4).................................                     8.54%       8.37%        9.04%
                                                                                                 ========    ========     ========
Cost of merchant occupancy (excluding marketing contributions) to
  reported sales(5).............................................................                     7.84%       7.65%        8.39%
                                                                                                 ========    ========     ========
====================================================================================================================================
</TABLE>
Notes:
(1)  Total reported merchant sales summarizes gross sales generated by merchants
     and includes  changes in merchant  mix and the effect of new space  created
     from the  acquisition  and  opening  of new and  expanded  outlet  centers.
     Several of the  Company's  outlet  centers  were  constructed,  expanded or
     acquired  during  the time  periods  contained  in  TABLE 3 and  therefore,
     reported  sales for such new openings,  expansions  and  acquisitions  were
     reported  only for the  partial  period  and were not  annualized.  TABLE 3
     should be read in conjunction  with the  information  summarized  under the
     caption "Properties--Portfolio of Properties".
(2)  Weighted  average reported sales per square foot is based on reported sales
     divided by the weighted  average square  footage  occupied by the merchants
     reporting those sales.  Same-space sales is defined as the weighted average
     reported  merchant sales per square foot for space open since the beginning
     of the prior year.
(3)  Total  merchant  occupancy  cost  per  square  foot  includes  base  rents,
     percentage rents and tenant  reimbursements which includes tenant marketing
     contributions.
(4)  Computed as follows:  total merchant occupancy cost per square foot divided
     by total weighted average reported merchant sales per square foot.
(5)  Computed  as  follows:  total  merchant  occupancy  cost  per  square  foot
     (excluding  marketing  contributions  paid by  merchants)  divided by total
     weighted average reported merchant sales per square foot.

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

     As shown in TABLE 4, tenant  reimbursements  as a percentage of recoverable
property  operating expenses and real estate taxes was 96.6% in 1999 compared to
96.8% in 1998. These levels reflect the Company's  continued  efforts to contain
operating expenses at its properties while requiring  merchants to pay their pro
rata share of these expenses.  TABLE 4 sets forth recoveries from merchants as a
percentage of total recoverable expenses for 1999, 1998, and 1997:

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

--------------------------------------------------------------------------------
                                                         Percentage of Expenses
Year                                                   Recovered from Tenants(1)
--------------------------------------------------------------------------------

1999..................................................................96.6%
1998..................................................................96.8%
1997..................................................................96.4%

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

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

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

Table 5-Components of Depreciation and Amortization Expense

     The components of depreciation and amortization  expense for 1999, 1998 and
1997 are summarized as follows:
<TABLE>
<CAPTION>
 -----------------------------------------------------------------------------------------------------------------------------------
 Years ended December 31,                                                                         1999          1998          1997
 -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>           <C>           <C>

 Building and improvements......................................................               $40,184       $30,299       $13,987
 Land improvements..............................................................                 5,779         3,609         2,838
 Tenant improvements............................................................                25,374        16,616         7,372
 Furniture and fixtures.........................................................                 1,540         1,084           858
 Leasing commissions(1).........................................................                   763         1,119         1,660
                                                                                              ------        ------        ------

       Total....................................................................               $73,640       $52,727       $26,715
                                                                                               =======       =======       =======

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

<PAGE>

     As shown in TABLE 6, interest  expense  increased by $33,230,  or 54.7%, to
$93,934 in 1999 compared to $60,704 in 1998.  This increase  reflects (i) higher
interest  incurred  of  $30,571,  (ii) a  decrease  in the  amount  of  interest
capitalized  in  connection  with  development  projects  of $1,147 and (iii) an
increase  in  amortization  of  deferred  financing  costs of $2,587.  Partially
offsetting  these  items  was  a  decrease  in  amortization  of  interest  rate
protection  contracts  of  $1,075.  Additionally,   interest  incurred  reflects
amortization  of debt premiums of $4,406 and $2,153 for the yers ended  December
31, 1999 and 1998, respectively.

     The increase in interest incurred is primarily  attributable to an increase
of $387,408 in the Company's  average debt  outstanding  during 1999 compared to
1998  and  (ii)  higher  interest  rates on  variable-rate  indebtedness  due to
increased market rates.
<PAGE>
Table 6-Components of Interest Expense

     The components of interest  expense for 1999,  1998 and 1997 are summarized
as follows:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years ended December 31,                                                                         1999          1998          1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>         <C>           <C>

Interest incurred...............................................................                $94,201       $63,630       $36,436
Interest capitalized............................................................                 (4,646)       (5,793)       (4,056)
Amortization of deferred financing costs........................................                  4,302         1,715         2,352
Amortization of interest rate protection contracts..............................                     77         1,152         1,390
                                                                                                -------       -------       -------
       Total....................................................................                $93,934       $60,704       $36,122
                                                                                                =======       =======       =======

====================================================================================================================================
</TABLE>
     Other charges  increased by $2,423 to $6,918 in 1999 compared to $4,495 for
1998.  This increase  reflects (i) the write-off of $3,100 of capitalized  costs
associated  with the  Company's  expired  option to purchase  its joint  venture
partner's  50.0% ownership  interest in Prime Outlets at New River,  and (ii) an
increase in other  miscellaneous  charges of $389.  Partially  offsetting  these
items was (i) a decrease in the provision for uncollectible  accounts receivable
of $608 and (ii) lower marketing costs of $458.

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

     The operating results for the Company's  Designer  Connection outlet stores
are reflected in loss on Designer  Connection in the Consolidated  Statements of
Operations for all periods presented.  When accounting for the fourth quarter of
1999,  the  Company  decided  to  discontinue  the  operations  of its  Designer
Connection  outlet  stores.  Accordingly,  the  Company  recorded  non-recurring
charges  aggregating  $3,659  including  (i) $1,659  related to the write-off of
costs associated with a web-site for Designer Connection and(ii) $2,000 of costs
to cover the  expected  cash and  non-cash  costs of the  closure.  The cash and
non-cash  costs of the closure  primarily  consist of (i)  employee  termination
costs, (ii) lease  obligations,  and (iii) the write-down of assets to their net
realizable  value.  The Company  expects  that the  operations  of its  Designer
Connection outlet stores will cease by July 31, 2000.

Table 7-Capital Expenditures

The  components  of  capital  expenditures  for  1999,  1998  and  1997 are
summarized as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Years ended December 31,                                                                       1999           1998         1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>          <C>            <C>
New developments................................................................           $ 37,553     $   43,459     $  34,175
Property acquisitions, net......................................................                  -      1,013,231(1)    191,345(2)
Expansions and renovations......................................................             49,934         99,585        39,037
Re-leasing tenant allowances....................................................              2,482          2,130           561
                                                                                           --------     ----------      --------

      Total.....................................................................           $ 89,969     $1,158,405      $265,118
                                                                                           ========     ==========      ========


====================================================================================================================================
</TABLE>
Notes:
(1)  Includes the assets  acquired by the Company during 1998 in connection with
     its merger with Horizon, net of the spin-off of HGP.
(2)  Includes the assets  acquired by the Company during 1997  consisting of (i)
     the purchase of seven outlet  centers  ($166,987)  and (ii) the purchase of
     the Company's joint venture partner's  partnership interest in Prime Outlet
     at Lodi ($24,358).

<PAGE>
<TABLE>
<CAPTION>
Table 8-Consolidated Quarterly Summary of Operations
------------------------------------------------------------------------------------------------------------------------------------
                                                              1999                                           1998
                                         ------------------------------------------- -----------------------------------------------
                                          Fourth       Third      Second     First       Fourth      Third     Second       First
                                          Quarter     Quarter    Quarter    Quarter     Quarter     Quarter    Quarter     Quarter

------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>          <C>         <C>        <C>         <C>         <C>        <C>          <C>
Total revenues......................... $ 75,137     $76,902     $75,574    $78,343     $76,947     $72,873    $44,594      $37,395
Total expenses(1)......................  111,496      70,450      67,897     69,045      66,682      62,301     37,435       29,944
                                         -------     -------     -------    -------     -------     -------    -------      -------
Income before loss on sale of real
   estate, minority interests and
   extraordinary loss.................. (36,359)       6,452        7,677      9,298      10,265     10,572      7,159        7,451
Loss on sale of real estate............ (15,153)           -            -          -           -          -    (15,461)           -
                                        -------       ------     --------   --------    --------    -------    -------      -------
Income (loss) before minority
   interests and extraordinary loss.... (51,512)       6,452        7,677      9,298      10,265     10,572     (8,302)       7,451
(Income) loss allocated to minority
   interests...........................  (2,770)          78         (534)         -           -       (214)     3,219       (5,461)
                                        -------      -------     --------   --------    --------    -------    -------      -------
Income (loss) before extraordinary
   loss................................ (54,282)       6,530        7,143      9,298      10,265     10,358     (5,083)       1,990
Extraordinary loss on early
   extinguishment of debt..............  (1,412)           -       (2,106)         -           -          -          -            -
                                        -------      -------     --------   --------    --------    -------    -------      -------
Net income (loss)...................... (55,694)       6,530        5,037      9,298      10,265     10,358     (5,083)       1,990
(Income) loss allocated to
   preferred shareholders..............  (5,668)      (6,048)      (6,046)     7,800      (6,956)    (6,741)    (6,741)      (4,166)
                                        -------      -------     --------   --------    --------    -------    -------      -------
Net income (loss) applicable to
  common shares....................... $(61,362)     $   482     $ (1,009)   $17,098     $ 3,309    $ 3,617   $(11,824)     $(2,176)
                                       ========      =======      =======    =======     =======    =======   ========      =======
Earnings per common share - basic:
Income (loss) before
  extraordinary loss.................. $  (1.39)     $  0.01     $   0.03    $  0.40     $  0.08    $  0.09   $  (0.40)     $ (0.08)
Extraordinary loss....................    (0.03)           -        (0.05)         -           -          -          -            -
                                       --------      -------     --------    -------     -------    -------   --------      -------
   Net income (loss).................. $  (1.42)     $  0.01     $  (0.02)   $  0.40     $  0.08    $  0.09   $  (0.40)     $ (0.08)
                                       ========      =======     ========    =======     =======    =======   ========      =======
Earnings per common share - diluted:
   Income (loss) before
     extraordinary loss............... $  (1.39)     $  0.01     $   0.03    $  0.06     $  0.08    $  0.09   $  (0.40)     $ (0.08)
   Extraordinary loss.................    (0.03)           -        (0.05)         -           -          -          -            -
                                       --------      -------     --------    -------     -------    -------   --------      -------
Net income (loss)..................... $  (1.42)     $  0.01     $  (0.02)   $  0.06     $  0.08    $  0.09   $  (0.40)     $ (0.08)
                                       ========      =======     ========    =======     =======    =======   ========      =======
Weighted average common shares
   outstanding:
   Basic..............................   43,357       43,286       43,186     42,951      42,736     42,314     29,859       27,295
                                       ========      =======     ========    =======     =======    =======   ========      =======
   Diluted............................   43,357       43,286       43,186     58,376      42,736     42,314     29,859       27,295
                                       ========      =======     ========    =======     =======    =======   ========      =======
Distributions paid per common
   share(2)........................... $  0.295     $  0.295     $  0.295    $ 0.295     $ 0.295    $ 0.295   $  0.795      $ 0.295
                                       ========      =======     ========    =======     =======    =======   ========      =======


====================================================================================================================================
</TABLE>
Notes:

(1)  The fourth  quarter of 1999  reflects  non-recurring  charges and  expenses
     aggregating  $37,981  including  (i) a provision  for asset  impairment  of
     $15,842,  (ii) a provision  for  abandoned  projects of $16,039,  (iii) the
     write-off of $3,100 of  capitalized  costs  associated  with the  Company's
     expired  option to purchase its joint  venture  partner's  50.0%  ownership
     interest in Prime  Outlets at New River,  and (iv)  $3,000 of start-up  and
     organizational   expenses   associated  with  the  Company's   eOutlets.com
     subsidiary  (see  Note 13 -  "Special  Charges"  and Note 14 -  "Subsequent
     Event" of the Notes to Consolidated Financial Statements).

(2)  The second  quarter of 1998 includes a special cash  distribution  of $0.50
     per common share relating to the Company's merger with Horizon completed in
     June 1998 (see Note 3 - "Business Combination" of the Notes to Consolidated
     Financial Statements).

<PAGE>
Comparison  of the year ended  December 31, 1998 to the year ended  December 31,
1997

     For the year ended  December 31, 1998,  the Company  reported net income of
$17,530.  The 1998 results include (i) a second quarter loss on the sale of real
estate of $15,461 in connection with the Merger  Transactions and (ii) a loss on
Designer  Connection  outlet stores of $1,067.  For the year ended  December 31,
1998, the net loss applicable to common  shareholders  was $7,074,  or $0.20 per
common share on a basic and diluted basis. For the year ended December 31, 1997,
the  Company  reported  net  income  of  $5,905.  The 1997  results  include  an
extraordinary  loss of $2,061 related to the  pre-payment  of certain  long-term
debt. For the year ended  December 31, 1997,  the net loss  applicable to common
shareholders was $6,821, or $0.36 per common share on a basic and diluted basis.


<PAGE>
     Total revenues were $231,809 for the year ended December 31, 1998, compared
to $129,130 for the year ended  December 31, 1997,  an increase of $102,679,  or
79.5%. Base rents increased  $70,330,  or 90.1%, in 1998 compared to 1997. These
increases are primarily due to the Portfolio  Expansion and the Horizon  Merger.
Straight-line  rents (included in base rents) were $1,229 and $643 for the years
ended December 31, 1998 and 1997, respectively. The average base rent per square
foot for new manufacturers' outlet leases negotiated and executed by the Company
was  $16.12  and  $15.52  for the  years  ended  December  31,  1998  and  1997,
respectively.

     Percentage  rents,  which  represent  rents based on a percentage  of sales
volume above a specified threshold,  increased $3,107, or 94.8%, during the year
ended  December 31, 1998 compared to the same period in 1997.  This increase was
attributable to higher reported  merchant sales in 1998 as well as the Portfolio
Expansion and the Horizon Merger.

     As summarized in TABLE 3, merchant sales reported to the Company  increased
by $1,735.1  million,  or 121.0%,  to $3,169.3 million from $1,434.2 million for
the years ended December 31, 1998 and 1997, respectively.  The increase in total
reported  merchant  sales is primarily  due to the  Portfolio  Expansion and the
Horizon Merger.  The weighted  average  reported  merchant sales per square foot
increased  by 7.8% to $254.56  per square  foot in 1998 from  $236.20 per square
foot in 1997. Total merchant  occupancy cost per square foot decreased  slightly
from $21.36 in 1997 to $21.30 in 1998 and  decreased as a percentage of reported
sales from 8.39% to 7.65%,  respectively.  The  decrease in the cost of merchant
occupancy  to reported  sales is  primarily  due to an increase in the  weighted
average  reported  merchant  sales  per  square  foot for the  Company's  entire
manufacturers' outlet portfolio.

     Tenant  reimbursements,  which  represent  the  contractual  recovery  from
tenants of certain operating  expenses,  increased by $29,633,  or 79.0% in 1998
over 1997. These increases are primarily due to the Portfolio  Expansion and the
Horizon Merger.

     As shown in Table 4, tenant  reimbursements  as a percentage of recoverable
property  operating expenses and real estate taxes was 96.8% in 1998 compared to
96.4% in 1997. These levels reflect the Company's  continued  efforts to contain
operating expenses at its properties while requiring  merchants to pay their pro
rata share of these expenses.

     Interest and other income  decreased by $391, or 3.8%, to $9,897 during the
year ended  December 31, 1998 as compared to $10,288 for the year ended December
31, 1997.  The decrease  reflects (i) lower  interest  income of $1,262 and (ii)
other  ancillary  income of $561.  Partially  offsetting  these items was higher
temporary  tenant  income of  $1,432.  The  reduction  in  interest  income  was
primarily  the result of the use of a portion of the  Company's  expansion  loan
escrow  account to fund certain of its  development  activities  during 1997 and
1998. The expansion  loan escrow  account is included in restricted  cash in the
Consolidated Balance Sheets.

     Property  operating expense  increased by $23,192,  or 78.6%, to $52,684 in
1998 compared to $29,492 in 1997. Real estate taxes expense increased by $7,288,
or 77.4%,  to $16,705 in 1998 from  $9,417 in 1997.  The  increases  in property
operating  expenses and real estate  taxes are  primarily  due to the  Portfolio
Expansions  and the  Horizon  Merger.  As shown in  Table  5,  depreciation  and
amortization  expense  increased  by  $26,012,  or 97.4%,  to  $52,727  in 1998,
compared to $26,715 in 1997.  This increase  results from the  depreciation  and
amortization of assets  associated with the Portfolio  Expansion and the Horizon
Merger.

     As shown in Table 6, interest  expense  increased by $24,582,  or 68.1%, to
$60,704 in 1998  compared  to $36,122 in 1997.  This  increase  reflects  higher
interest incurred of $27,194.  Partially offsetting this item was an increase in
the amount of interest  capitalized in connection with  development  projects of
$1,737,  a decrease in amortization  of deferred  financing costs of $637, and a
decrease  in  amortization  of  interest  rate  protection  contracts  of  $238.
Additionally, interest incurred reflects amortization of debt premiums of $2,153
for the year ended December 31, 1998.

     The increase in interest incurred is primarily  attributable to an increase
of $379,108 in the Company's  average debt  outstanding  during 1998 compared to
1997.

<PAGE>
     Other charges  increased by $1,261 to $4,495 in 1998 compared to $3,234 for
1997. This increase reflects (i) a higher provision for potentially unsuccessful
pre-development  efforts  of  $508,  (ii)  an  increase  in  the  provision  for
uncollectible   accounts   receivable  of  $417,  (iii)  an  increase  in  other
miscellaneous charges of $215, and (iv) higher marketing costs of $121.

     In connection with the closing of its merger with Horizon on June 15, 1998,
the Company sold Indiana  Factory  Shops and Nebraska  Crossing  Factory  Stores
(collectively,  the  "Prime  Transferred  Properties")  to HGP for an  aggregate
consideration of $26,015  resulting in a second quarter loss on the sale of real
estate of $15,461.


<PAGE>
Liquidity and Capital Resources

Sources and Uses of Cash

     For the year ended  December  31,  1999,  net cash  provided  by  operating
activities was $102,221,  net cash used in investing activities was $56,666, and
net cash used in financing activities was $43,977.

     The uses of cash for investing  activities  during 1999 of $89,969 included
(i) costs  associated  with  development  and  construction of two expansions to
existing  outlet  centers  aggregating  85,000  square feet of GLA which  opened
during 1999, (ii) costs  associated with  development and  construction of a new
center (Prime Outlets of Puerto Rico) and three  expansions to existing  centers
aggregating  approximately 457,000 square feet of GLA which are expected to open
during 2000,  (iii) costs  associated  with the completion of two outlet centers
and nine expansions to existing outlet centers  aggregating  931,000 square feet
of GLA which opened during 1998, and (iv) costs for  pre-development  activities
related to future  development  opportunities.  Partially  offsetting these uses
were  $33,303 of net proceeds  from the sale of Prime  Outlets at Birch Run. See
"Prime/Estein Joint Venture Transaction" for further information.

     The gross uses of cash from financing  activities  during 1999 included (i)
principal  repayments  on notes payable of $204,432,  (ii)  preferred and common
stock  distributions  of $75,536,  (iii)  costs  associated  with the  Company's
redemption  of its  outstanding  shares of Series C preferred  stock of $45,054,
(iv)  distributions  to minority  interests,  including  limited partners of the
Operating Partnership,  of $12,976, and (v) deferred financing costs of $10,321.
Partially offsetting these items were proceeds from new borrowings of $304,342.

     Although the Company believes that cash flow from (i) operations,  (ii) new
borrowings,  (iii) refinancing of certain existing debt, (iv) the potential sale
of a joint venture  interest in certain  outlet  centers,  and (v) the potential
sale of equity or debt  securities in the public or private capital markets will
be sufficient to satisfy its scheduled debt service  obligations and sustain its
operations for the next year. There can be no assurance that the Company will be
successful in obtaining the required amount of funds for these items or that the
terms of capital raising activities, if any, will be as favorable as the Company
has  experienced  in prior  periods.  At December 31, 1999,  unused  commitments
available  for  borrowings  under  various loan  facilities  were $13,546 in the
aggregate.

Dividends and Distributions

     In order to qualify as a Real Estate  Investment Trust ("REIT") for federal
income tax purposes,  the Company is required to pay distributions to its common
and  preferred  shareholders  of at least  95.0% of its REIT  taxable  income in
addition to satisfying other requirements.  Although the Company intends to make
distributions  in accordance with the  requirements of the Internal Revenue Code
of 1986,  as amended,  it also  intends to retain such  amounts as it  considers
necessary from time to time for capital and liquidity needs of the Company.

<PAGE>
     The Company's current policy with respect to common stock  distributions is
to only make  payments to the extent  necessary to maintain its status as a REIT
for federal income tax purposes.  Based on the Company's  current federal income
tax projections, it does not expect to pay any distributions on its common stock
or common units of limited  partnership  interest in Prime Retail,  L.P.  during
2000.  With  respect to  distributions  on the  Company's  10.5% Series A Senior
Cumulative  Preferred  Stock  ("Senior  Preferred  Stock")  and 8.5%  Cumulative
Convertible  Preferred Stock ("Series B Convertible Preferred Stock"), the Board
of Directors  considered  and did not declare a quarterly  distribution  on such
preferred  stock due February 15, 2000.  The Board of Directors will continue to
evaluate the payment of such preferred stock distributions on a quarterly basis.
The holders of the Senior  Preferred  Stock and Series B  Convertible  Preferred
Stock,  each series voting  separately  as a class,  have the right to elect two
additional  members to the Company's Board of Directors if the equivalent of six
consecutive  quarterly  dividends  on these  series  of  preferred  stock are in
arrears.  Each of such two directors  will be elected to serve until the earlier
of (i) the election and  qualification  of such  directors'  successor,  or (ii)
payment of the dividend arrearage.

     The Company is currently prohibited under the terms of more than one of its
credit  agreements  from  paying  dividends  or  distributions  as a  result  of
non-compliance with a financial covenant.  In addition,  the Company may make no
distributions  to its common  shareholders  unless it is current with respect to
distributions to its preferred shareholders.  Annualized cumulative dividends on
the Company's  Senior  Preferred Stock and Series B Convertible  Preferred Stock
outstanding as of December 31, 1999 are $6,038 and $16,636, respectively.

Debt Repayments

     The Company's  aggregate  indebtedness  was  $1,260,670  and  $1,217,507 at
December  31,  1999  and  1998,   respectively.   At  December  31,  1999,  such
indebtedness  had a weighted average maturity of 5.19 years and bore interest at
a weighted  average  interest  rate of 7.87% per annum.  At December  31,  1999,
$940,484,  or 74.6%,  of such  indebtedness  bore  interest  at fixed  rates and
$320,186,  or 25.4%, of such  indebtedness  bore interest at variable rates. The
Company is obligated to repay,  excluding acceleration  provisions,  $95,732 and
$229,632 of mortgage indebtedness during 2000 and 2001, respectively.  See "Debt
Covenants."

Repurchase of Shares of Series C Preferred Stock

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

Business Combination

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

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

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

<PAGE>
B  Convertible Preferred Stock of the Company.

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

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

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

Debt Transactions

     On  December  8,  1999,  the  Company   refinanced  the  existing  mortgage
indebtedness on Prime Outlets at Williamsburg (the "Williamsburg Center") with a
$42,500 loan  facility  from a financial  institution.  At closing,  the Company
received an initial funding of $32,500 (the "Initial Funding") and a commitment,
subject to various conditions, for up to $10,000 (the "Final Draw") to finance a
planned expansion to the Williamsburg  Center. The Initial Funding generated net
cash  proceeds  of $9,077  after the  repayment  in full of $22,405 of  existing
mortgage  indebtedness  and closing costs. The Final Draw is expected to be made
in a single advance subject to satisfaction of certain conditions, including the
substantial   completion  of  the  expansion  to  the  Williamsburg  Center.  In
connection with the debt refinancing, the Company incurred an extraordinary loss
of $159,  net of minority  interests  of $40. The loan  facility  consists of an
interim loan (the "Interim Loan") and a permanent loan (the  "Permanent  Loan").
The Interim  Loan (i) bears  interest at 30-day LIBOR plus 2.5%,  (ii)  requires
monthly interest-only  payments,  (iii) is collateralized by a first mortgage on
the Williamsburg  Center, and (iv) matures on January 11, 2002. The Interim Loan
may be  converted  to the  Permanent  Loan  subject to  satisfaction  of certain
conditions.  The Permanent Loan would (i) bear interest at a fixed-rate equal to
prevailing  market rates,  (ii) require monthly  principal and interest payments
pursuant to a 25-year amortization schedule,  (iii) be collateralized by a first
mortgage on the Williamsburg Center, and (iv) have a term of 10 years.

     On November 15, 1999,  the Company  closed on a $20,000  subordinated  loan
(the  "Subordinated  Loan") from an institutional  lender. The Subordinated Loan
(i) bears interest at a fixed-rate of 15.0%, (ii) requires monthly interest-only
payments,  (iii) matures on June 30, 2000,  and (iv) is secured by a pledge of a
security  interest in certain of the Company's  ownership  interests in, and the
available cash flow from five outlet centers,  including Prime Outlets of Puerto
Rico,  which is  currently  under  construction.  The Company may elect,  at its
option, to extend the maturity of the Subordinated Loan to December 31, 2000.

     On November 12, 1999, the Company closed on $55,000 term loan (the "$55,000
Term  Loan")  from a  financial  institution.  The  $55,000  Term Loan (i) bears
interest at 30-day LIBOR plus 6.0%, (ii) requires monthly principal and interest
payments,  and (iii)  matures in two years.  The $55,000 Term Loan was issued by
Prime Retail Capital I, L.L.C. ("PRC"), a newly-formed  wholly-owned  subsidiary
of Prime  Retail,  L.P.,  and is secured by the excess  cash flow from 15 outlet
centers after the payment of senior debt service and reserves  under an existing
$349,797  first mortgage loan. The $55,000 Term Loan also is secured by a pledge
of PRC's 49.9% limited  partnership  interest in partnerships that own twelve of
those outlet centers and Prime Retail,  L.P.'s 100% equity  interest in PRC. The
$55,000 Term Loan is unconditionally  guaranteed by Prime Retail, L.P. and Prime
Retail,  Inc. The Company used the net cash  proceeds from the $55,000 Term Loan
to repay  $40,944  of  short-term  indebtedness  and to repay a  portion  of the
borrowings under the Line of Credit.
<PAGE>
     During October 1999, the Company  refinanced its $28,250 of  variable-rate,
tax-exempt  revenue bonds by issuing  $28,250 of fixed rate  tax-exempt  revenue
bonds (the "Fixed Rate Bonds").  The Fixed Rate Bonds bear interest ranging from
6.875% to 7.0%, require  semi-annual  interest payments and mature from December
15, 2012 through  December 1, 2014.  The Fixed Rate Bonds are  redeemable by the
Company  commencing  in  December  2006  at 102%  of the  outstanding  principal
balance.  The redemption  price  decreases  incrementally  each year  thereafter
through  December 2008, at which date the  redemption  price is fixed at 100% of
the outstanding principal balance. In connection with the debt refinancing,  the
Company incurred an extraordinary loss on early  extinguishment of debt of $536,
net of minority interests of $134. Unless cured or waived, the defaults existing
under certain of the Company's credit agreements discussed more fully below will
entitle  the  holders of the Fixed Rate Bonds to put such  obligations  to Prime
Retail, Inc. at a price equal to par plus accrued interest.

     On September 29, 1999, the Company received $40,000 of proceeds from a line
of credit facility (the "Line of Credit") with a group of institutional lenders.
These proceeds were used to repurchase the Company's  Series C Preferred  Stock.
The Line of Credit (i) bore  interest at a fixed-rate  of 11.0%,  (ii)  required
monthly  interest-only  payments,  and (iii) matured in nine months. The Line of
Credit was repaid in full on November 19, 1999. In connection with the repayment
of the Line of Credit,  the Company incurred an extraordinary  loss on the early
extinguishment  of debt of $717, net of minority  interests of $179. The lenders
are entitled to receive a cash payment that  increases  their  internal  rate of
return with respect to amounts  advanced  under such  facility by 4.0% per annum
(the "Cash Payment"). Lenders under the Line of Credit also received warrants to
purchase  a  5%  interest  in  the  Company's   e-commerce   subsidiary,   which
subsequently ceased all operations effective April 12, 2000 (see eOutlets.com)

     On July 11,  1999,  the  Company's  $20,000  unsecured  line of credit (the
"Corporate  Line") was renewed  and  increased  to  $25,000.  The purpose of the
Corporate  Line is to provide  working  capital  to  facilitate  the  funding of
short-term  operating  cash needs of the Company.  The  Corporate  Line bears an
interest  rate of 30-day  LIBOR plus  2.50% and  matures  on July 11,  2000.  At
December 31, 1999, the Corporate Line had an  outstanding  principal  balance of
$22,175.  There can be no  assurance  that the  Company  will be  successful  in
renewing the Corporate  Line or that a renewal of the Corporate  Line will be on
terms as favorable as the Company has experienced in prior periods.

     On April 27, 1999,  the Company  closed on a $63,000 debt  financing with a
financial institution that provided  approximately $27,900 of net proceeds.  The
$63,000  note is (i)  collateralized  by a first  mortgage  on Prime  Outlets at
Niagara Falls USA, (ii) bears interest at a fixed rate of 7.604%, (iii) requires
monthly   principal  and  interest  payments  of  $450  pursuant  to  a  30-year
amortization schedule, and (iv) matures in 10 years. In connection with the debt
refinancing,  the Company incurred an extraordinary loss on early extinguishment
of debt of $2,106, net of minority interests of $534.

     As of December 31, 1999, the Company is a guarantor or otherwise  obligated
with  respect to an aggregate of $12,722 of the  indebtedness  of Horizon  Group
Properties, Inc. and its affiliates ("HGP") including a $10,000 obligation under
HGP's  secured  credit  facility  which  bears a rate of  interest of LIBOR plus
1.90%,  matures in July 2001, and is collateralized by seven properties  located
throughout the United States.

     On April 1, 1998,  Horizon  consummated  an  agreement  with Castle & Cooke
Properties,  Inc. which released Horizon from its future  obligations  under its
long-term  lease of the Dole  Cannery  outlet  center in  Honolulu,  Hawaii,  in
connection  with the  formation of a joint  venture with certain  affiliates  of
Castle & Cooke,  Inc.  ("Castle & Cooke") to operate  such  property.  Under the
terms of the  agreement,  Castle & Cooke  Properties,  Inc., the landlord of the
project and an affiliate of Castle & Cooke, released Horizon from any continuing
obligations  under the lease,  which  expires in 2045, in exchange for Horizon's
conveyance to the joint venture of its rights and obligations  under such lease.
The  agreement  also  provided  that  Horizon  transfer  to such  joint  venture
substantially  all of Horizon's  economic  interest in its outlet center in Lake
Elsinore,  California  together  with  legal  title to vacant  property  located
adjacent  to the center.  As of  December  31,  1999,  the Company  held a small
minority  interest in the joint venture but has no obligation or commitment with
respect to the  post-closing  operations of the Dole Cannery  project.  Mortgage
indebtedness  with an  outstanding  balance of $28,938 at December 31, 1999, for
which one of the Company's subsidiary  partnerships remains legally responsible,
is  collateralized  by a first mortgage on the Lake Elsinore outlet center.  The
joint venture, as a limited partner in such subsidiary partnership, is obligated
to  make  capital  contributions  to  the  partnership  to pay  debt  financing,
operating  and  other   expenses  under  certain   conditions.   The  subsidiary
partnership  will remain  legally  responsible  for such expenses in case of any
shortfalls  by the joint  venture with  respect to such  capital  contributions.
Castle & Cooke has  provided  the Company with an  unconditional  guaranty  with
respect to any such shortfalls.
<PAGE>
Debt Covenants

     Certain of the Company's debt obligations  require  compliance with various
financial  loan covenants  including,  but not limited to, those relating to the
Company's (i) total outstanding variable interest rate indebtedness,  (ii) total
outstanding  indebtedness to total market value, as defined,  (iii) consolidated
net worth, as defined,  and (iv) debt service and fixed charge coverage  ratios,
as defined.

     As a result of its  financial  results for the quarter  ended  December 31,
1999, the Company is not in compliance  with a financial  covenant  contained in
two of its credit  facilities,  the  Subordinated  Loan and a $40,000  unsecured
revolving loan (the "Unsecured  Revolving Loan").  Neither of the loans has been
accelerated  nor was notice of the respective  lender's  intention to accelerate
the maturity of the loans received by the Company.  The Company  entered into an
amendment  to the  Subordinated  Loan on  February  23,  2000  which  waived the
covenant  violation as of December  31, 1999 and  modified  the  covenant  terms
through the  Subordinated  Loan's  maturity  date.  The Company is  currently in
discussions  with the Unsecured  Revolving Loan lender to obtain a waiver and/or
amend the loan;  however,  there can be no  assurance as to whether and when the
Company will obtain any such waiver or  amendment.  Furthermore,  the  Company's
failure to obtain from its  independent  auditor's  an  unqualified  report with
respect to its consolidated  financial statements will also constitute a default
under these two credit facilities.

     In addition, noncompliance with the covenants described above has triggered
certain cross-default  provisions with respect to several of the Company's other
debt instruments, including the Subordinated Loan, the $55,000 Term Loan and the
Fixed Rate Bonds.  None of these loans have been accelerated nor was a notice of
the respective lender's intent to accelerate received by the Company. Management
is currently in discussion  with the affected  lenders to obtain a resolution of
the cross-default  provisions. If the Company is unable to obtain such waiver or
amendment to the  Unsecured  Revolving  Loan and reach  resolution  with certain
other lenders,  the Company will look to (i) obtain  alternative  financing from
other  financial  institutions,  or (ii) the potential sale of assets or a joint
venture  interest  in  certain  outlet  centers  as sources of cash to repay the
amounts  outstanding under such loans.  This condition raises  substantial doubt
about the  Company's  ability to  continue  as a going  concern.  The  financial
statements 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  this
uncertainty.

     Although the Company continues to maintain its regularly scheduled payments
under all of its indebtedness,  there can be no assurance that one or all of the
affected  lenders will not declare a default and accelerate the maturity of such
indebtedness.  Additionally,  there can be no assurance that the Company will be
in compliance  with its  financial  debt  covenants in future  periods since the
Company's  future  financial   performance  is  subject  to  various  risks  and
uncertainties,  including but not limited to, the effects of increases in market
interest rates from current levels;  the risk of potential  increases in vacancy
rates and the resulting  impact on the Company's  revenue;  and risks associated
with refinancing the Company's  current debt obligations or obtain new financing
under terms as favorable as the Company has experienced in prior periods.

Prime/Estein Joint Venture Transaction

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

     On November  19,  1999,  the  Company  successfully  completed  the initial
installment of the Prime/Estein  Joint Venture Agreement  consisting of the sale
of Prime  Outlets at Birch Run to the Venture  for  aggregate  consideration  of
$117,000,  including  a $64,500  "wrap-around"  first  mortgage  provided by the
Company.  In connection with the sale of Prime Outlets at Birch Run, the Company
received cash proceeds of $33,303,  net of transaction costs and recorded a loss
on the sale of real estate of $9,326.  Effective  November 19, 1999, the Company
commenced  accounting for its 30.0% ownership interest in Prime Outlets at Birch
Run in accordance with the equity method of accounting.  The "wrap-around" first
mortgage  provided by the Company to the Venture has a ten-year  term at a fixed
interest  rate of 7.75%  requiring  monthly  payments of principal  and interest
pursuant to a 25-year amortization schedule. The Company's net investment in the
"wrap-around"  first  mortgage  as of December  31,  1999 was  $10,745  which is
included in other assets in the Consolidated  Balance Sheet.  Additionally,  the
Venture assumed $53,755 of outstanding  mortgage  indebtedness.  Included in the
aggregate    consideration    is   a    $5,500    payment    related    to   the
covenant-not-to-compete and a $3,000 payment related to the licensing agreement.
The payments to the Company for the  covenant-not-to-compete  and the  licensing
agreement  are  included  in  accounts  payable  and  other  liabilities  in the
consolidated  balance sheet and will be amortized into interest and other income
over their ten-year lives.

     During the fourth quarter of 1999, the Company  recorded a loss on the sale
of real estate of $5,827  related to the  write-down  of the  carrying  value of
Prime  Outlets  at  Williamsburg  based on the terms of the  Prime/Estein  Joint
Venture  Agreement.  On February  23,  2000,  the Company  completed  the second
installment of the Prime/Estein  Joint Venture Agreement  consisting of the sale
of Prime Outlets at Williamsburg to the Venture for aggregate  consideration  of
$59,000,  including (i) the assumption of mortgage indebtedness of $32,500, (ii)
a $1,250  payment  related  to the  covenant-not-to-compete  and  (iii) a $1,500
payment related to the licensing agreement. In connection with the sale of Prime
Outlets at Williamsburg,  the Company received (i) cash proceeds of $11,063, net
of  transaction  costs and (ii) a promissory  note in the amount of $10,000 from
the Venture (of which Estein's obligation is $7,000),  such amount to be payable
on or before the ealier of the closing of the  proposed  sale of an expansion of
the  Williamsburg  center or December 15, 2000. The promissory note requires the
monthly payment of interest in arrears at an annual rate of 7.75%. Although, the
Company  expects to close on the sale of Prime Outlets at Hagerstown,  including
the expansion scheduled to open during the second quarter of 2000, for aggregate
consideration of approximately  $80,500 on or about May 15, 2000,  completion of
this  transaction  remains  subject  to various  conditions  and there can be no
assurance  as to whether or when this  transaction  will be  consummated.  As of
December 31, 1999, the Company  classified  $97,639  representing  the aggregate
carrying value of Prime Outlets at Williamsburg  and Prime Outlets at Hagerstown
(collectively,  the "Held for Sale  Properties")  as assets held for sale in its
Consolidated  Balance  Sheet.  Total revenues and expenses for the Held for Sale
Properties  were $16,243 and $12,185,  respectively  for the year ended December
31, 1999.

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

Planned Development

     The Company  opened a 21,000  square  foot  expansion  at Prime  Outlets at
Lebanon in March 1999 and a 64,000 square foot expansion at Prime Outlets at San
Marcos in August 1999. The Home Co., the Company's first home furnishings  store
which it owns a 47.6% interest  through a joint venture,  occupies 64,000 square
feet of the  expansion  at San Marcos.  In addition,  construction  continues at
Prime Outlets of Puerto Rico, the first outlet center in Puerto Rico, which will
contain  175,000  square  feet of GLA,  and is  expected  to open in the  second
quarter  of  2000.  Additionally,  the  Company  continues  construction  of two
expansions  consisting of 162,000 and 50,000 square feet of GLA at Prime Outlets
at Hagerstown and Prime Outlets at San Marcos,  respectively.  These  expansions
are scheduled to open during the second quarter of 2000. The Company  expects to
begin  construction  in the  second  quarter  of 2000 of a  60,000  square  foot
expansion to Prime Outlets at Williamsburg.  This expansion is scheduled to open
in the fourth  quarter of 2000.  At December 31, 1999,  the  remaining  budgeted
capital   expenditures  for  projects  scheduled  to  open  in  2000  aggregated
approximately  $31,300,  while anticipated capital  expenditures  related to the
completion  of  expansions  of  existing   outlet  centers  opened  during  1999
(aggregating 102,000 square feet of GLA) approximated $750.

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

eOutlets.com

     On April  12,  2000,  the  Company  announced  that it has been  unable  to
conclude an  agreement  to transfer  ownership  of its  wholly-owned  e-commerce
subsidiary,   primeoutlets.com   inc.,   also  known  as   eOutlets.com,   to  a
management-led  investor group comprised of eOutlets.com  management and outside
investors. Effective April 12, 2000, eOutlets.com ceased all operations.

     In connection with the discontinuance of eOutlets.com,  the Company expects
to incur a non-recurring  loss of approximately  $13,000 in the first quarter of
2000.  The  non-recurring  loss  includes  (i) the  write-off of $3,500 of costs
capitalized during 1999 and (ii)  approximately  $9,500 of costs incurred during
2000,   including  costs  associated  with   discontinuing   the  operations  of
eOutlets.com.  In addition,  during 1999 the Company incurred expenses of $3,500
related to organizational and other start-up  expenditures of eOutlets.com which
are  reflected  in  corporate   general  and   administrative   expense  in  the
Consolidated Statements of Operations.

<PAGE>
Taxability of Distributions

     TABLE 9 summarizes the taxability of distributions paid during (i) the year
ended  December 31, 1999 (ii) the period from  January 1 to June 15,  1998,  and
(iii) the period from June 16 to December  31, 1998.  Distributions  paid by the
Company  out of its  current  or  accumulated  earnings  and  profits  (and  not
designated as capital gains dividends) will constitute taxable  distributions to
each holder.  To the extent the Company makes  distributions  (not designated as
capital gains  dividends) in excess of its current and accumulated  earnings and
profits,  such  distributions  will be  treated  first as a  tax-free  return of
capital to each holder, reducing the adjusted basis which such holder has in his
shares of stock by the amount of such  distributions  (but not below zero), with
distributions  in excess of a holder's  adjusted  basis in his stock  taxable as
capital gains (provided that the shares have been held as a capital asset).

Table 9-Taxability of Distributions

<TABLE>
<CAPTION>
 -----------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Period from   Period from June
                                                                                    Year ended    January 1 to     16 to December
                                                                             December 31, 1999   June 15, 1998           31, 1998

 -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>           <C>              <C>
 Senior Preferred Stock
     Ordinary income............................................................        100.0%        100.0%            100.0%
 Series B Convertible Preferred Stock
     Ordinary income............................................................        100.0%        100.0%             63.7%
     Return of capital..........................................................            -             -              36.3%
 Series C Preferred Stock
     Ordinary income............................................................        100.0%         18.7%                -
     Return of capital..........................................................            -          81.3%            100.0%
 Common Stock
     Ordinary income............................................................         23.0%            -                 -
     Return of capital..........................................................         77.0%        100.0%            100.0%


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

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

Economic Conditions

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

Impact of Year 2000

     In prior years,  the Company  discussed the nature and progress of its plan
to become Year 2000 ready.  In 1999, the Company  completed its  remediation and
testing of systems.  As a result of those planning and  implementation  efforts,
the  Company   experienced  no  significant   disruptions  in  mission  critical
information technology and non-information technology systems and believes those
systems successfully  responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 date change. The Company
is not aware of any material  problems  resulting from Year 2000 issues,  either
with its products,  its internal systems,  or the products and services of third
parties  with which the Company  does  business.  The Company  will  continue to
monitor its mission critical computer application and those of its suppliers and
vendors  throughout  the Year 2000 to ensure that any latent  Year 2000  matters
that may arise are addressed promptly.
<PAGE>
Funds from Operations

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

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

     TABLE 10 provides a reconciliation of income before allocations to minority
interests and  preferred  shareholders  to FFO for the years ended  December 31,
1999,  1998 and 1997.  FFO decreased  $21,699,  or 24.1% to $68,321 for the year
ended  December 31, 1999 from $90,020 for the year ended  December 31, 1998. The
1999 FFO results reflect fourth quarter 1999 non-recurring  charges and expenses
aggregating $37,981,  including (i) a provision for asset impairment of $15,842,
(ii) a provision  for  abandoned  projects of $16,039,  (iii) the  write-off  of
$3,100 of  capitalized  costs  associated  with the Company's  expired option to
purchase its joint venture  partner's 50.0% ownership  interest in Prime Outlets
at New River, and (iv) $3,000 of start-up and organizational expenses associated
with the Company's eOutlets.com subsidiary.

     Excluding these non-recurring charges and expenses,  FFO increased $16,282,
or 18.1%,  to $106,302 for the year ended December 31, 1999 from $90,020 for the
year ended  December 31, 1998.  The  increase is primarily  attributable  to the
Portfolio Expansion and the Horizon Merger.


<TABLE>
<CAPTION>
Table 10-Funds from Operations

---------------------------------------------------------------------------------------------- ------------ -------------
Years ended December 31,                                                               1999         1998          1997
---------------------------------------------------------------------------------------------- ------------ -------------
<S>                                                                               <C>            <C>           <C>
Income (loss) before minority interests and extraordinary loss..................  $(28,085)      $19,986       $ 18,547
FFO adjustments:
Loss on sale of real estate.....................................................    15,153        15,461              -
Discontinued operations - Designer Connection...................................     6,561         1,067              -
Real estate depreciation and amortization.......................................    73,053        52,295         26,413
Unconsolidated joint venture adjustments........................................     1,639         1,211          1,758
                                                                                  --------       -------       --------
FFO before allocations to minority interests and preferred shareholders.........  $ 68,321       $90,020       $ 46,718
                                                                                  ========       =======       ========
Other Data:
Net cash provided by operating activities.......................................  $102,221       $61,335       $ 49,856
Net cash used in investing activities...........................................   (56,666)     (145,596)      (229,956)
Net cash provided by (used in) financing activities.............................   (43,977)       83,653        182,549
====================================================================================================================================
</TABLE>

     The payout ratios based on distributions made by the Company divided by FFO
for 1999, 1998 and 1997 were 97.4%, 92.9%, and 103.7%, respectively.
<PAGE>
Table 11-Consolidated Quarterly Summary of Funds from Operations
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                 1999                                       1998
                                              --------------------------------------------------------------------------------------
                                                   Fourth     Third    Second     First      Fourth      Third    Second      First
                                                  Quarter   Quarter   Quarter   Quarter     Quarter    Quarter   Quarter    Quarter
------------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>         <C>       <C>       <C>         <C>        <C>       <C>        <C>

Income (loss) before minority interests and
   extraordinary loss......................    $ (51,512)   $6,452    $7,677   $ 9,298     $10,265    $10,572   $(8,302)   $ 7,451
FFO adjustments:
Loss on sale of real estate................       15,153         -          -        -           -          -    15,461          -
Discontinued operations - Designer Connection
                                                   5,553       120        543      345         163        324       287        293
Real estate depreciation and amortization..       17,318    19,188     18,435   18,112      18,475     16,327     9,792      7,701
Unconsolidated joint venture adjustments...          737       473        174      255         303        303       302        303
                                                --------    ------    -------  -------    --------    -------   -------    -------
FFO before allocations to minority interests
   and preferred shareholders..............     $(12,751) $ 26,233   $ 26,829  $28,010    $ 29,206   $ 27,526  $ 17,540   $ 15,748
                                                ========  ========   ========  =======    ========   ========  ========   ========
Other Data:
Net cash provided by (used in) operating
   activities..............................     $ 22,978  $ 27,058   $ 29,604  $ 22,581   $  8,817   $ 34,346  $ (7,406)  $ 25,578
Net cash provided by (used in) investing
   activities..............................        1,265   (11,079)   (27,193)  (19,659)   (22,750)   (44,469)  (50,975)   (27,402)
Net cash provided by (used in) financing
   activities..............................      (20,284)  (14,201)    (1,135)   (8,357)     5,940      5,144    76,595     (4,026)

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



<PAGE>
     ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MATERIAL RISK

Market Risk Sensitivity

Interest Rate Risk

     In the ordinary course of business, the Company is exposed to the impact of
interest rate changes.  The Company employs established  policies and procedures
to manage its exposure to interest rate changes. The Company uses a mix of fixed
and variable  rate debt to (i) limit the impact of interest  rate changes on its
results from  operations and cash flows and (ii) to lower its overall  borrowing
costs.  The  following  table  provides  a summary of  principal  cash flows and
related  interest  rates by  fiscal  year of  maturity,  excluding  acceleration
provisions.  Variable  interest rates are based on the weighted average rates of
the portfolio at December 31, 1999.
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                        Year of Maturity
------------------------------------------------------------------------------------------------------------------------------------
                                              2000          2001          2002          2003          2004     Thereafter     Total
--------------------------------------- ------------- ------------- ------------- ------------- ------------- -------------- -------
<S>                                        <C>          <C>            <C>          <C>            <C>          <C>
Fixed rate:
Principal...........................       $37,605       $38,632       $46,529      $348,761        $17,050     $451,907   $940,484
Average interest rate...............         11.40%         7.54%         7.04%         7.76%          7.75%        7.09%      7.54%
Variable rate:
Principal...........................       $58,127      $191,000       $33,137        $1,152        $36,770            -   $320,186
Average interest rate...............          9.07%         8.94%         6.31%         7.98%          7.98%           -       8.20%

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

              ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

        None.


<PAGE>
                                    PART III

     The  information  required  by  Items  10,  11,  12  and  13  (except  that
information regarding executive officers called for by Item 10 that is contained
in Part I) is  incorporated  herein  by  reference  from  the  definitive  proxy
statement that the Company  intends to file pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, on or before April 29, 2000.

                                     PART IV

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

<TABLE>
<CAPTION>
<S>                                                                                            <C>
(a)   1. Financial Statements

       Report of Independent Auditors                                                          F-1

       Consolidated Balance Sheets as of December 31, 1999 and 1998                            F-2

       Consolidated Statements ofOperations for the years ended December 31,
        1999, 1998 and 1997                                                                    F-3

       Consolidated  Statements of Cash Flows for the years ended  December  31,
        1999, 1998 and 1997                                                                    F-4

       Consolidated  Statements of Shareholders' Equity for the years ended
         December 31, 1999,1998 and 1997                                                       F-6

       Notes to Consolidated Financial Statements                                              F-7

      2.  Financial Statement Schedules

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

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

         Schedule III--Real Estate and Accumulated Depreciation                                F-23

         Notes to Schedule III                                                                 F-25

</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)]

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



<PAGE>

Exhibit
Number     Description
-------    -----------


     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).]

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

     10.1A  Amendment No. 1 to Third  Amended and Restated  Agreement of Limited
Partnership of Prime Retail, L.P. dated as of September 28, 1999.

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

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

     # 10.4 Executive Employment Agreement (Michael W. 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, 1994, as amended (File No. 0-23616).]

     # 10.5  Separation Agreement  dated  February 23, 2000 by and between Prime
Retail, Inc. and Abraham Rosenthal.

     # 10.6  Employment  Agreement   dated   October   6,   1999  by  and  among
primeoutlets.com  inc., Prime Retail,  L.P.,  Prime Retail,  Inc. and William H.
Carpenter, Jr.

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

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

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

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

     10.18  Noncompetition and Restriction  Agreement with Michael W. Reschke of
PGI  [Incorporated  by  reference  to the same titled  exhibit in the  Company's
Annual  Report on Form 10-K for the fiscal  year ended  December  31,  1994,  as
amended (File No. 0-23616).]

<PAGE>

Exhibit
Number     Description
-------    -----------

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

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

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

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

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

     10.31 Form of Standby Bond Purchase and Indemnity  Agreement  [Incorporated
by reference to the same titled exhibit in the Company's  registration statement
on Form S-11 (Registration No. 33-68536).]

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

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

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

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

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

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

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

<PAGE>
Exhibit
Number     Description
-------    -----------


     # 10.39 Loan Agreement  dated as of June 15, 1998 between Outlet Village of
Kittery Limited  Partnership,  the Prime Outlets at Gilroy Limited  Partnership,
The Prime Outlets at Michigan City Limited  Partnership  and Finger Lakes Outlet
Center,   L.L.C.   and  Nomura  Asset  Capital   Corporation   (Permanent  Loan)
[Incorporated  by reference to Exhibit 10.1 in the Company's  Current  Report on
Form 8-K dated June 15, 1998 (File No. 001-13301)]

     # 10.40 Form of Deed of Trust, Security Agreement,  Assignment of Rents and
Fixture Filings with Nomura Asset Capital Corporation (Permanent Loan and Bridge
Loan)  [Incorporated by reference to Exhibit 10.2 in the Company' Current Report
on Form 8-K dated June 15, 1998 (File No. 001-13301)]

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

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

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

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

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

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

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

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

     21 Subsidiaries of Prime Retail, Inc.

     23 Consent of Ernst & Young LLP

     27.1 Financial Data Schedule

     _____________________
     Note:

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

     None

     (c) Exhibits

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

     (d) Financial Statements and Schedules

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

<PAGE>
                                   SIGNATURES

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

                               PRIME RETAIL, INC.

Dated: April 14, 2000                                /s/ Glenn D. Reschke
                                                     --------------------
                                                        Glenn D. Reschke
                                                        President and
                                                        Chief Executive Officer

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


         /s/Michael W. Reschke                                    April 14, 2000
         ---------------------------
         Michael W. Reschke
         Chairman of the Board

         /s/William H. Carpenter, Jr.                             April 14, 2000
         ----------------------------
         William H. Carpenter, Jr.
         Director

         /s/William P. Dickey                                     April 14, 2000
         ----------------------------
         William P. Dickey
         Director

         /s/Norman Perlmutter                                     April 14, 2000
         ----------------------------
         Norman Perlmutter
         Director

         /s/Robert D. Perlmutter                                  April 14, 2000
         ----------------------------
         Robert D. Perlmutter
         Director

         /s/Kenneth A. Randall                                    April 14, 2000
         ----------------------------
         Kenneth A. Randall
         Director

         /s/Sharon Sharp                                          April 14, 2000
         ----------------------------
         Sharon Sharp
         Director

         /s/James R. Thompson                                     April 14, 2000
         ----------------------------
         James R. Thompson
         Director

         /s/Marvin S. Traub                                       April 14, 2000
         ----------------------------
         Marvin S. Traub
         Director


<PAGE>





                         Report of Independent Auditors



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


     We have  audited  the  accompanying  consolidated  balance  sheets of Prime
Retail,  Inc. (the  "Company") as of December 31, 1999 and 1998, and the related
consolidated  statements of operations,  shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1999.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in all material respects,  the consolidated financial position of the Company at
December 31, 1999 and 1998, and the  consolidated  results of its operations and
its cash flows for each of the three  years in the  period  ended  December  31,
1999, in conformity with accounting  principles generally accepted in the United
States.

     The  accompanying  financial  statements  have been prepared  assuming that
Prime Retail,  Inc. will continue as a going concern. As more fully described in
Note 6, the Company is not in compliance with a financial  covenant contained in
one of its credit  facilities.  In addition,  noncompliance  with the  financial
covenant has triggered certain cross-default  provisions with respect to several
of the Company's other debt  instruments.  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.



                                       /s/ Ernst & Young LLP



Baltimore, Maryland
March 23, 2000,
except for Note 14, as to which the date is
April 12, 2000


<PAGE>

                               Prime Retail, Inc.

                           Consolidated Balance Sheets

                (Amounts in thousands, except share information)

<TABLE>
<CAPTION>

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

 Assets

 Investment in rental property:
    Land........................................................................   $  181,854  $  206,386
    Buildings and improvements..................................................    1,560,710   1,753,641
    Property under development..................................................       66,581      45,068
    Furniture and equipment.....................................................       17,406      10,627
                                                                                    ---------   ---------
                                                                                    1,826,551   2,015,722
 Accumulated depreciation.......................................................     (183,954)   (127,747)
                                                                                    ---------   ---------
                                                                                    1,642,597   1,887,975

 Cash and cash equivalents......................................................        7,343       5,765
 Restricted cash................................................................       28,131      34,969
 Accounts receivable, net.......................................................       18,926      21,233
 Deferred charges, net..........................................................       13,503      12,518
 Investment in partnerships.....................................................       18,941       8,386
 Assets held for sale...........................................................       97,639           -
 Due from affiliates, net.......................................................        4,140         988
 Other assets...................................................................       24,838       4,630
                                                                                   ----------- ----------

         Total assets..........................................................    $1,856,058  $1,976,464
                                                                                   =========== ===========
 Liabilities and Shareholders' Equity

 Bonds payable..................................................................   $   32,900  $   32,900
 Notes payable(See Note 6)......................................................    1,227,770   1,184,607
 Accrued interest...............................................................        8,033       7,878
 Real estate taxes payable......................................................       10,700      11,229
 Construction costs payable.....................................................        5,123       3,754
 Accounts payable and other liabilities.........................................       73,340      69,879
                                                                                    ---------   ---------

        Total liabilities.......................................................    1,357,866   1,310,247

 Minority interests.............................................................        1,505      22,483
 Shareholders' equity:
     Shares of preferred  stock,  24,315,000 shares  authorized:
        10.5% Series A Senior  Cumulative  Preferred Stock, $.01 par value
         (liquidation  preference of$57,500), 2,300,000 shares issued and
         outstanding............................................................           23          23
        8.5% Series B Cumulative Participating Convertible Preferred Stock, $.01
         par value (liquidation preference of $195,703), 7,828,125 shares issued
         and outstanding........................................................           78          78
        Series C Cumulative Convertible Redeemable Preferred Stock, $.01 par
          value 4,363,636 shares issued and outstanding at December 31, 1998....            -          44
     Shares of common stock, 150,000,000 shares authorized:
        Common stock, $.01 par value, 43,368,620 and 42,736,742 shares issued
        and outstanding, respectively...........................................          434         427
     Additional paid-in capital.................................................      709,122     759,105
     Distributions in excess of net income......................................     (212,970)   (115,943)
                                                                                   ----------   ----------
          Total shareholders' equity............................................      496,687     643,734
                                                                                   ----------   ---------

          Total liabilities and shareholders' equity............................   $1,856,058  $1,976,464
                                                                                   ==========  ==========

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

See accompanying notes to financial statements.


<PAGE>

                               Prime Retail, Inc.

                      Consolidated Statements of Operations

              (Amounts in thousands, except per share information)

<TABLE>
<CAPTION>

 -----------------------------------------------------------------------------------------------------------------------------------
 Years ended December 31,                                                                1999           1998         1997
 -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>            <C>          <C>
 Revenues

 Base rents.....................................................................    $ 193,979       $148,376     $ 78,046
 Percentage rents...............................................................        8,085          6,384        3,277
 Tenant reimbursements..........................................................       90,063         67,152       37,519
 Interest and other.............................................................       13,829          9,897       10,288
                                                                                    ---------       --------     --------
       Total revenues...........................................................      305,956        231,809      129,130

 Expenses

 Property operating.............................................................       70,862         52,684       29,492
 Real estate taxes..............................................................       22,405         16,705        9,417
 Depreciation and amortization..................................................       73,640         52,727       26,715
 Corporate general and administrative...........................................       12,687          7,980        5,603
 Interest.......................................................................       93,934         60,704       36,122
 Provision for abandoned projects...............................................       16,039              -            -
 Provision for asset impairment.................................................       15,842              -            -
 Loss on Designer Connection....................................................        6,561          1,067            -
 Other charges..................................................................        6,918          4,495        3,234
                                                                                     --------       --------     --------
       Total expenses...........................................................      318,888        196,362      110,583
                                                                                     --------       --------     --------

 Income (loss) before loss on sale of real estate, minority interests
    and extraordinary loss......................................................      (12,932)        35,447       18,547
 Loss on sale of real estate....................................................      (15,153)       (15,461)           -
                                                                                     --------       --------     --------
 Income (loss) before minority interests and extraordinary loss.................      (28,085)        19,986       18,547
 Income allocated to minority interests.........................................       (3,226)        (2,456)     (10,581)
                                                                                     --------       --------     --------
 Income (loss) before extraordinary loss........................................      (31,311)        17,530        7,966
 Extraordinary loss on early extinguishment of debt,
    net of minority interests in the amount of $887 in 1999 and $0 in 1997......       (3,518)             -       (2,061)
                                                                                     ---------      --------     --------
 Net income (loss)..............................................................      (34,829)        17,530        5,905
 Income allocated to preferred shareholders.....................................       (9,962)       (24,604)     (12,726)
                                                                                    ---------       --------     --------
 Net loss applicable to common shares...........................................    $ (44,791)      $ (7,074)    $ (6,821)
                                                                                    =========       ========     ========
 Earnings per common share - basic:
       Loss before extraordinary loss...........................................    $   (0.96)       $ (0.20)    $  (0.25)
       Extraordinary loss.......................................................        (0.08)             -        (0.11)
                                                                                    ---------       --------     --------
       Net loss.................................................................    $   (1.04)       $ (0.20)    $  (0.36)
                                                                                    =========       ========     ========
 Earnings per common share - diluted:
       Loss before extraordinary loss...........................................    $   (1.22)       $ (0.20)    $  (0.25)
       Extraordinary loss.......................................................        (0.08)             -        (0.11)
                                                                                    ---------        -------     --------
       Net loss.................................................................    $   (1.30)       $ (0.20)    $  (0.36)
                                                                                    =========        =======     ========
 Weighted average common shares outstanding
       Basic....................................................................       43,196         35,612       19,189
                                                                                    =========        ========    ========
       Diluted..................................................................       44,260         35,612       19,189
                                                                                    =========        ========    ========

 ===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.


<PAGE>
                               Prime Retail, Inc.

                      Consolidated Statements of Cash Flows

                             (Amounts in thousands)

<TABLE>
<CAPTION>

 -----------------------------------------------------------------------------------------------------------------------------------
 Years ended December 31,                                                             1999         1998         1997
 -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>            <C>          <C>

 Operating Activities
 Net income (loss)..............................................................  $(34,829)      $17,530      $ 5,905
 Adjustments to reconcile net income (loss) to net cash provided by operating
       activities:
Income allocated to minority interests..........................................     3,226         2,456       10,581
       Loss on sale of real estate..............................................    15,153        15,461            -
       Extraordinary loss, net of minority interests............................     3,518             -        2,061
       Depreciation.............................................................    72,877        51,638       25,055
       Amortization of deferred financing costs and interest rate protection
        contracts...............................................................     4,379         2,867        3,742
       Amortization of leasing commissions......................................       763         1,119        1,660
       Provision for uncollectible accounts receivable..........................       779         1,387          970
       Provision for abandoned projects.........................................    16,039             -            -
       Provision for Designer Connection........................................     3,659             -            -
       Provision for asset impairment...........................................    15,842             -            -
       Gain on sale of land.....................................................       (72)         (274)        (904)
 Changes in operating assets and liabilities:
    (Increase) decrease in accounts receivable..................................     2,155       (17,605)      (4,619)
    (Increase) decrease in other assets.........................................     6,375        (3,903)       1,400
    Increase (decrease) in other liabilities....................................    (7,798)      (11,620)       3,878
    Increase in accrued interest................................................       155         2,279          127
                                                                                   -------      --------      -------
       Net cash provided by operating activities................................   102,221        61,335       49,856
                                                                                   -------      --------      -------

 Investing Activities
 Additions to investment in rental property.....................................   (36,265)      (46,862)     (21,057)
 Increase in property under development.........................................   (53,704)      (89,190)     (49,668)
 Acquisition of outlet centers..................................................         -             -     (159,232)
 Acquisition of Horizon, net of cash acquired and spin-off of HGP...............         -       (35,559)           -
 Proceeds from sale of outlet centers...........................................    33,303        26,015            -
                                                                                   -------      --------     --------
       Net cash used in investing activities....................................   (56,666)     (145,596)    (229,956)
                                                                                   -------      --------     --------
 Financing Activities
 Net proceeds from offerings....................................................         -             -      242,729
 Redemption of Series C preferred stock.........................................   (45,054)            -            -
 Proceeds from notes payable....................................................   304,342       467,998      160,057
 Principal repayments on notes payable..........................................  (204,432)     (283,806)    (175,683)
 Deferred financing fees........................................................   (10,321)       (3,277)        (583)
 Distributions and dividends paid...............................................   (75,536)      (79,451)     (33,605)
 Distributions to minority interests............................................   (12,976)      (17,811)     (10,366)
                                                                                   -------       -------      -------
       Net cash provided by (used in) financing activities......................   (43,977)       83,653      182,549
                                                                                   -------       -------      -------
 Increase (decrease) in cash and cash equivalents...............................     1,578          (608)       2,449
 Cash and cash equivalents at beginning of year.................................     5,765         6,373        3,924
                                                                                   -------       -------      -------
 Cash and cash equivalents at end of year.......................................   $ 7,343       $ 5,765      $ 6,373
                                                                                   =======       =======      =======


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

See accompanying notes to financial statements.

<PAGE>


                               PRIME RETAIL, INC.
                Consolidated Statements of Cash Flows (continued)
                             (Amounts in thousands)

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

------------------------------------------------------------------------------------------------------------------------------------
Years ended December 31,                                                                 1999              1998              1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>               <C>             <C>
Assumption of notes payable.....................................................     $      -          $     -         $   31,368
                                                                                     ========          =======         ==========
The following assets and liabilities were sold in connection
with the sale of Prime Outlets at Birch Run on November 19, 1999:

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

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

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

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

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

See accompanying notes to financial statements



<PAGE>
                               Prime Retail, Inc.

                 Consolidated Statements of Shareholders' Equity

                (Amounts in thousands, except share information)
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                      Series A   Series B  Series C          Additional  Distributions       Total
                                                     Preferred  Preferred Preferred   Common   Paid-in   in Excess of  Shareholders'
                                                         Stock      Stock    Stock    Stock    Capital     Net Income       Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>       <C>       <C>      <C>      <C>          <C>           <C>
Balance, January 1, 1997.............................    $ 23      $ 28               $ 134    $165,346     $(26,322)     $139,209
Issuance of 175,800 shares of Series B preferred
   stock, net of issuance cost.......................        -        2                   -       3,798            -         3,800
Issuance of 13,890,300 shares of common stock, net
   of issuance cost..................................        -        -                 139     180,035            -       180,174
Issuance of 3,636,363 shares of Series C preferred
   stock, net of issuance cost.......................        -        -      $ 36         -      49,009            -        49,045
Net income...........................................        -        -         -         -           -        5,905         5,905
Common distributions ($1.180 per share)..............        -        -         -         -           -      (21,232)      (21,232)
Preferred distributions and dividends:
         Series A ($2.625 per share).................        -        -         -         -           -       (6,037)       (6,037)
         Series B ($2.125 per share).................        -        -         -         -           -       (6,336)       (6,336)
                                                         -----    -----     -----      -----    -------      -------       -------
Balance, December 31, 1997...........................       23       30        36       273     398,188      (54,022)      344,528
Issuance of 14,466,329 shares of common stock, net
   of issuance cost..................................        -        -         -       145     214,137            -       214,282
Issuance of 4,846,325 shares of Series B preferred
   stock, net of issuance cost.......................        -       48         -         -     118,687            -       118,735
Exchange of 975,462 common units for common
    stock ...........................................        -        -         -         9      18,754            -        18,763
Exchange of 727,273 Series C preferred units for
   727,273 shares of Series C preferred stock........        -        -         8         -       9,339            -         9,347
Net income...........................................        -        -         -         -           -       17,530        17,530
Common distributions ($1.680 per share)..............        -        -         -         -           -      (54,750)      (54,750)
Preferred distributions and dividends:
     Series A ($2.625 per share).....................        -        -         -         -           -       (6,037)       (6,037)
     Series B ($2.725 per share).....................        -        -         -         -           -      (13,275)      (13,275)
     Series C ($1.680 per share).....................        -        -         -         -           -       (5,389)       (5,389)
                                                         -----    -----     -----     -----     -------      -------      --------
Balance, December 31, 1998...........................       23       78        44       427     759,105     (115,943)      643,734
Issuance of 160,585 restricted shares of
   common stock .....................................        -        -         -         2       1,380            -         1,382
Exchange of 471,293 common units for common
    stock ...........................................        -        -         -         5       6,985            -         6,990
Redemption of 4,363,636 shares of Series C
   preferred stock...................................        -        -       (44)        -     (58,348)      13,338       (45,054)
Net loss.............................................        -        -         -         -           -      (34,829)      (34,829)
Common distributions ($1.180 per share)..............        -        -         -         -           -      (50,948)      (50,948)
Preferred distributions and dividends:
     Series A ($2.625 per share).....................        -        -         -         -           -       (6,038)       (6,038)
Series B ($2.125 per share).........................         -        -         -         -           -      (16,635)      (16,635)
     Series C ($0.885 per share).....................        -        -         -         -           -       (1,915)       (1,915)
                                                         -----    -----     -----     -----    --------    ---------      --------
Balance, December 31, 1999...........................    $  23    $  78     $   -     $ 434    $709,122    $(212,970)     $496,687
                                                         =====    =====     =====     =====    ========    =========      ========


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

</TABLE>
See accompanying notes to financial statements.


<PAGE>

                              Prime Retail, Inc.

                   Notes to Consolidated Financial Statements

            (Amounts in thousands, except share and unit information)


Note 1 - Organization and Basis of Presentation

Organization

     Prime Retail, Inc. (the "Company") is a self-administered  and self-managed
real  estate  investment  trust  ("REIT")  that  operates  primarily  within one
business segment and develops, acquires, owns and operates outlet centers in the
United  States.  The Company's  outlet center  portfolio,  including four outlet
centers owned through joint venture partnerships,  consists of 51 outlet centers
in 26 states,  which total 14,699,000 square feet of gross leasable area ("GLA")
at December  31,  1999.  As a  fully-integrated  real estate  firm,  the Company
provides development, construction, accounting, finance, leasing, marketing, and
management services for all of its properties (the "Properties").  The Company's
Properties  are held and  substantially  all of its business and  operations are
conducted through Prime Retail, L.P. (the "Operating Partnership").  The Company
controls the Operating  Partnership as its sole general partner and is dependent
upon the distributions or other payments from the Operating  Partnership to meet
its financial obligations.

     At December 31, 1999, the Company owned 2,300,000 Senior Preferred Units of
the Operating  Partnership (the "Senior  Preferred  Units"),  7,828,125 Series B
Convertible  Preferred  Units  of  the  Operating  Partnership  (the  "Series  B
Convertible  Preferred  Units"),  and  43,368,620  Common  Units of  partnership
interest  in  the  Operating  Partnership  (the  "Common  Units").  Each  Senior
Preferred  Unit, and Series B Convertible  Preferred  Unit,  (collectively,  the
"Preferred  Units")  entitles  the  Company  to receive  distributions  from the
Operating  Partnership in an amount equal to the dividend  declared or paid with
respect to a share of the Company's Series A Senior  Cumulative  Preferred Stock
("Senior  Preferred  Stock") and Series B Cumulative  Convertible  Participating
Preferred Stock ("Series B Convertible Preferred Stock"), respectively, prior to
the payment by the Operating  Partnership of  distributions  with respect to the
Common  Units.  Series  B  Convertible  Preferred  Units  will be  automatically
converted  into  Common  Units  to the  extent  of any  conversion  of  Series B
Convertible  Preferred  Stock into Common  Stock.  The  Preferred  Units will be
redeemed by the Operating  Partnership to the extent of any redemption of Senior
Preferred Stock or Series B Convertible Preferred Stock.

     A  summary  of the  holders  of units in the  Operating  Partnership  as of
December 31, 1999 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        43,368,620
Prime Group, Inc., management and other (1).....................................           -                 -        10,840,208
                                                                                   ---------         ---------        ----------
                                                                                   2,300,000         7,828,125        54,208,828
                                                                                   =========         =========        ==========


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

Note:
(1)  Includes 993,480 units beneficially owned by management and 4,102,923 units
     owned by certain executive  officers based on their ownership interests  in
     Prime Group, Inc.

     As of December 31, 1999, the Company has a 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.

     The Operating  Partnership  is the 1% sole general  partner of Prime Retail
Services  Limited  Partnership  (the  "Services  Partnership").   The  Operating
Partnership  owns  100%  of the  non-voting  preferred  stock  of  Prime  Retail
Services,  Inc. (the "Services  Corporation") which, in turn, is the 99% limited
partner of the Services  Partnership.  Certain members of management own 100% of
the voting common stock of the Services  Corporation  and no cash  distributions
were made during the years ended December 31, 1999,  1998 and 1997. The Services
Partnership was formed  primarily to operate  business lines of the Company that
are  not  directly  associated  with  the  collection  of  rents.  The  Services
Corporation is subject to federal, state and local taxes.

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

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

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

     Significant  intercompany accounts and transactions have been eliminated in
consolidation.   Operating  results   associated  with  the  Company's  Designer
Connection outlet stores have been classified as loss on Designer  Connection in
the  Consolidated  Statements of Operations for all periods  presented.  Certain
amounts in prior years have been reclassified to the current year presentation.

Note 2 - Summary of Significant Accounting Policies

Rental Property

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

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

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

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

Cash Equivalents

     The Company  considers  highly liquid  investments with a maturity of three
months or less when purchased to be cash equivalents.

Accounts Receivable

     Management   regularly  reviews  accounts   receivable  and  determines  an
appropriate  range for the allowance for doubtful accounts based upon the impact
of  economic  conditions  on the  merchants'  ability  to pay,  past  collection
experience  and such other factors  which,  in  management's  judgment,  deserve
current  recognition.  In turn, a provision is charged against earnings in order
to maintain the  allowance  level within this range.  The allowance for doubtful
accounts at December 31, 1999 and 1998 was $7,008 and $4,288, respectively.

     Accounts  receivable due after one year  representing  straight-line  rents
were $8,285 and $7,233 at December 31, 1999 and 1998, respectively.


<PAGE>

Deferred Charges

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

Due from Affiliates, Net

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

Revenue Recognition

     Leases with tenants are accounted for as operating  leases.  Minimum rental
income is  recognized  on a  straight-line  basis over the term of the lease and
unpaid rents are included in accounts  receivable  in the  accompanying  balance
sheet. 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,  (iii) shares of Series C Preferred  Stock were  converted into shares of
Common  Stock,  and (iv)  shares of Series B  Convertible  Preferred  Stock were
converted  into shares of Common Stock.  For the year ended December 31, 1999, a
redemption  discount and dividends  aggregating $12,710 related to the Company's
repurchase of its Series C Preferred  Stock were excluded from the numerator and
incremental  shares of 1,064 were included in the denominator of the computation
of diluted  EPS. For the year ended  December 31, 1999,  the effect of all other
exercises and conversions was anti-dilutive  and,  therefore,  was excluded from
the  computation of diluted EPS. For the years ended December 31, 1998 and 1997,
the effect of all exercises and conversions was  anti-dilutive  and,  therefore,
dilutive EPS is equivalent to basic EPS.


<PAGE>

     The  following  table  sets  forth the  computation  of basic  and  diluted
earnings per share:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

Years ended December 31,                                                               1999               1998            1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                 <C>             <C>
Numerator:
    Income (loss) before minority interests and extraordinary loss..............   $(28,085)           $19,986         $18,547
    Income allocated to minority interests......................................     (3,226)            (2,456)        (10,581)
                                                                                   --------            -------         -------
    Net income (loss) before extraordinary loss.................................    (31,311)            17,530           7,966
    Income allocated to preferred shareholders..................................     (9,962)           (24,604)        (12,726)
                                                                                   --------            -------         -------
    Numerator for basic earnings per share -
     loss before extraordinary loss available to common shareholders............    (41,273)            (7,074)         (4,760)
    Effect of dilutive securities:
    Series C preferred dividends................................................        628                  -               -

    Series C preferred stock redemption discount................................    (13,338)                 -               -
                                                                                   --------            -------         -------

    Numerator for diluted earnings per share -
     loss before extraordinary loss available to common shareholders............  $ (53,983)         $ (7,074)        $ (4,760)
                                                                                  =========          ========         ========
Denominator:
    Denominator for basic earnings before extraordinary loss per share -
      weighted average common shares outstanding................................     43,196            35,612           19,189

    Effect of dilutive securities:
    Series C preferred shares...................................................      1,064                 -                -
                                                                                   --------           -------          -------

    Denominator for diluted earnings before extraordinary loss per share -
      adjusted weighted average common shares outstanding.......................     44,260            35,612           19,189
                                                                                   ========           =======          =======

    Basic earnings before extraordinary loss per common share ..................   $  (0.96)          $ (0.20)         $ (0.25)
                                                                                   ========           =======          =======

    Diluted earnings before extraordinary loss per common share ................   $  (1.22)          $ (0.20)         $ (0.25)
                                                                                   ========           =======          =======

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

Stock Based Compensation

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



<PAGE>
Income Taxes

     The Company has  elected to be taxed as a REIT under  Sections  856 through
860 of the Internal  Revenue Code of 1986,  as amended.  As a REIT,  the Company
generally  will not be subject to federal  income tax at the corporate  level on
income it distributes to its shareholders so long as it distributes at least 95%
of its taxable income (excluding any net capital gain) each year. If the Company
fails to qualify as a REIT in any taxable  year,  the Company will be subject to
federal income tax (including  any  applicable  alternative  minimum tax) on its
taxable income at regular  corporate rates.  Even if the Company  qualifies as a
REIT,  the Company may be subject to certain state and local taxes on its income
and property. The Company incurred $234, $337, and $263 of state and local taxes
for the years ended December 31, 1999, 1998 and 1997, respectively.  The Company
paid $68,  $424,  and $170 of state  and  local  taxes  during  the years  ended
December 31, 1999 and 1998, and 1997, respectively.

     The   following   table   summarizes   the   taxability  of  dividends  and
distributions  paid during (i) the year ended December 31, 1999, (ii) the period
from January 1 to June 15,  1998,  (iii) the period from June 16 to December 31,
1998, and (iv) the year ended December 31, 1997:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Period from    Period from
                                                                             Year ended   January 1 to     June 16 to     Year ended
                                                                           December 31,       June 15,   December 31,   December 31,
                                                                                   1999           1998           1998           1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>           <C>            <C>            <C>
 Senior Preferred Stock
    Ordinary income ............................................................ $2.625        $1.3125        $1.3125         $2.625
                                                                                 ======        =======        =======         ======
 Series B Convertible Preferred Stock
    Ordinary income ............................................................ $2.125        $ 1.663        $ 0.922         $1.940
    Return of capital...........................................................      -              -          0.525          0.185
                                                                                 ------        -------        -------         ------
                                                                                 $2.125        $ 1.663        $ 1.447         $2.125
 Series C Preferred Stock                                                        ======        =======        =======         ======

    Ordinary income ............................................................ $0.885         $0.167        $     -         $    -
    Return of capital...........................................................      -          0.725          0.912              -
                                                                                 ------         ------        -------         ------
                                                                                 $0.885         $0.892        $ 0.912         $    -
                                                                                 ======        =======        =======         ======
 Common Stock

   Ordinary..................................................................... $0.271         $    -         $    -         $    -
    Return of capital...........................................................  0.909          1.090          0.912          1.180
                                                                                 ------         ------         ------         ------
                                                                                 $1.180         $1.090         $0.912         $1.180
                                                                                 ======         ======         ======         ======

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

Risks and Uncertainties

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

     In  addition to  traditional  sources of risks to  retailers  and owners of
outlet centers,  which are mentioned above, the Company's outlet centers compete
for customers  with web-based  retailers.  Because of the newness of competition
from  web-based  retailers,  it is  difficult  to  quantify  the  risk  of  such
competition to the Company.

Note 3 - Business Combination

     On June 15,  1998,  the merger and other  transactions  (collectively,  the
"Merger  Transactions")  as set forth in the  agreement  and plan of merger (the
"Merger Agreement") between the Company and Horizon Group, Inc. ("Horizon") were
consummated for an aggregate consideration of $1,134,682,  including liabilities
assumed and related transaction costs.
<PAGE>
     Pursuant to the terms of the Merger Agreement, the Company acquired (i) all
of the  outstanding  shares of common  stock of Horizon at an exchange  ratio of
0.20 of a share of the Company's Series B Convertible  Preferred Stock and 0.597
of a share of the  Company's  Common  Stock for each  share of  common  stock of
Horizon,   and  (ii)  all  of  the  outstanding  limited  partnership  units  of
Horizon/Glen  Outlet Centers Limited Partnership  ("Horizon  Partnership") at an
exchange  ratio  of  0.9193  of a Common  Unit of  partnership  interest  in the
Operating  Partnership.  A total of  4,846,325  shares of  Series B  Convertible
Preferred Stock and 14,466,329 shares of Common Stock were issued by the Company
to the  shareholders  of Horizon and  3,782,121  Common Units were issued by the
Operating Partnership to the limited partners of Horizon Partnership.

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

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

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

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

     The  following  unaudited pro forma  information  presents a summary of the
Company's  consolidated  results  of  operations  as if these  acquisitions  and
dispositions had occurred on January 1, 1998:
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
Year ended December 31,                                                                 1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>
Total revenues..................................................................     $ 285,157
                                                                                     =========
Net income from continuing operations...........................................     $  35,699
                                                                                     =========
Net income applicable to common shares..........................................     $   7,775
                                                                                     =========

Earnings per common share - basic and diluted...................................     $    0.18
                                                                                     =========
Weighted average common shares outstanding......................................        42,151
                                                                                     =========

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

     These  unaudited  pro forma  results  have been  prepared  for  comparative
purposes only and include certain adjustments,  such as additional  depreciation
expense based on the purchase price of such assets acquired and interest expense
on debt incurred to finance the acquisitions.  These unaudited pro forma results
do not purport to be  indicative  of the results of  operations  which  actually
would have resulted had the combination  been in effect on January 1, 1998 or of
future results of operations of the Company.

Note 4 - Restricted Cash

     At December 31, 1999 and 1998, the Company had placed in escrow $28,131 and
$34,969,  respectively,  to be used to complete certain development projects, to
fund real estate taxes and debt service and to pay certain operating costs under
mortgage loan agreements.  At December 31, 1999, restricted cash included $1,326
relating to a nonrecourse  expansion  loan which was funded during  January 2000
for certain development costs relating to the completion of expansions of ten of
the Company's outlet centers.



<PAGE>
Note 5 - Deferred Charges

     Deferred charges were as follows:
<TABLE>
<CAPTION>

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

  Leasing commissions...........................................................   $11,307       $10,775
  Financing costs...............................................................    21,466        17,787
                                                                                   -------       -------
                                                                                    32,773        28,562
  Accumulated amortization......................................................   (19,270)      (16,044)
                                                                                   -------       -------
                                                                                   $13,503       $12,518
                                                                                   =======       =======

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

Note 6 - Bonds and Notes Payable

     Bonds payable consisted of the following:

<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
December 31,                                                                            1999             1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>              <C>
Fixed rate tax-exempt revenue bonds (the "Bonds"),  interest rates, ranging from
     6.88% to 7.00%, interest-only payments, due 2012 to 2014, collateralized by
     properties in Chattanooga, TN and Knoxville,TN.............................     $28,250         $28,250
UrbanDevelopment  Action  Grant  Loans,  3%  through  August 31,   1997  and  6%
     thereafter,  interest-only  payments,  due 2016 to 2019,  collateralized by
     property in Chattanooga, TN................................................       4,650           4,650
                                                                                     -------         -------
                                                                                     $32,900         $32,900
                                                                                     =======         =======

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

     During October 1999, the Company  refinanced its $28,250 of  variable-rate,
tax-exempt  revenue bonds by issuing  $28,250 of fixed rate  tax-exempt  revenue
bonds (the "Fixed Rate Bonds").  The Fixed Rate Bonds bear interest ranging from
6.875% to 7.0%, require  semi-annual  interest payments and mature from December
15, 2012 through  December 1, 2014.  The Fixed Rate Bonds are  redeemable by the
Company  commencing  in  December  2006  at 102%  of the  outstanding  principal
balance.  The redemption  price  decreases  incrementally  each year  thereafter
through  December 2008, at which date the  redemption  price is fixed at 100% of
the outstanding principal balance. In connection with the debt refinancing,  the
Company incurred an extraordinary loss on early  extinguishment of debt of $536,
net of minority interests of $134. Unless cured or waived, the defaults existing
under certain of the Company's credit agreements discussed more fully below will
entitle  the  holders of the Fixed Rate Bonds to put such  obligations  to Prime
Retail, Inc. at a price equal to par plus accrued interest.


Notes payable consisted of the following:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
December 31,                                                                                          1999               1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                 <C>                <C>
First Mortgage  and Expansion Loan,  LIBOR plus 1.51% through  November 10,1998,
7.782%  thereafter,  monthly  installments  of $2,580  including  interest,  due
November 11, 2003,  collateralized by fifteen  properties located throughout the
United     States...............................................................                    $349,797           $353,018

Permanent Loan, 6.99%,  monthly  installments of $1,248 including interest,  due
July 11, 2008,  collateralized by four properties  located throughout the United
States..........................................................................                     176,734            179,096

Secured  Revolving Loan, LIBOR plus 1.35%,  7.81% at December 31, 1999,  monthly
interest-only  payments,  due June 11, 2001,  collateralized  by six  properties
located throughout the United States............................................                     112,000             95,000

Mortgage,  6.927%,  monthly installments of $565 including interest, due October
11,  2006,  collateralized  by four  properties  located  throughout  the United
States..........................................................................                      75,893             77,365

Mortgage, 6.927%, monthly installments of $527 including interest, due March 11,
2006,   collateralized  by  four  properties   located   throughout  the  United
States..........................................................................                      66,935             68,495

Mortgage,  7.60% monthly  installments of $450 including  interest,  due May 10,
2009,     collateralized    by    property    located    in    Niagara    Falls,
NY..............................................................................                      62,693                  -

Term loan, LIBOR plus 6.00%, 12.48% at December 31, 1999, monthly  interest-only
payments  through  January 10,  2000;  monthly  principal of $1,000 and interest
thereafter,  due  December  10,  2001,  collateralized  by excess cash flow from
fifteen   properties   located   throughout   the   United   States.............                      55,000                  -

Mortgage,  6.95%, monthly installments of $351 including interest,  due November
1, 2005,  collateralized  by property  located in Vero Beach,  FL and  Woodbury,
MN.............................................................                                       44,917             46,037

Unsecured  Revolving Loan, LIBOR plus 1.75%, 8.21% at December 31, 1999, monthly
interest-only payments,  quarterly principal payments of $1,000 commencing March
31, 2000, due September 11,2001.................................................                      40,000             40,000
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
December 31,                                                                                          1999               1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                 <C>                <C>
Construction  Mortgage  Loan,  LIBOR plus  1.50%,  7.98% at December  31,  1999,
monthly  interest-only  payments  through May 31, 2002;  monthly  principal  and
interest  payments  thereafter,  due June 1, 2004,  collateralized  by  property
located  in   Hagerstown, MD....................................................                    $ 38,560           $ 29,914

Mortgage, 6.915%, monthly installments of $357  including  interest,  due  June
10,   2002,   collateralized   by   property   located   in   Conroe,   TX   and
Jeffersonville,OH...............................................................                      36,696             38,381

Interim  loan,  LIBOR plus 2.50%,  8.98% at
December  31,  1999,  monthly  interest-only  payments,  due January  11,  2002,
collateralized by property located  in Williamsburg,VA..........................                      32,500                  -

Mortgage,  8.35%, monthly installments of $215 including interest, due June
11, 2007,  collateralized  by three  properties  located  throughout  the United
States..........................................................................                      26,113             26,463

Unsecured  Corporate Line,  $25,000 at December 31, 1999, LIBOR plus 2.50%,7.88%
at  December  31,  1999,  monthly  interest-only  payments,  due July 11, 2000..                      22,175              3,000

Subordinated loan, 15.00%,  monthly interest-only  payments,  due June 30, 2000,
collateralized  by  a  security  interest  and  available  cash  flows  of  five
properties located throughout the United States.................................                      20,000                  -

Construction  mortgage  loan,  prime  rate or LIBOR  plus  1.75%,  8.50% at
December  31,  1999,  monthly  interest-only  payments,  due  December 31, 2000,
collateralized by property located in Lebanon, TN...............................                      19,951             19,951

Mortgage,  6.91%, monthly installments of $154 including interest, due June
10, 2001, collateralized  by  property located in  Edinburgh, IN................                      17,347             17,965

Mortgage,  6.95%,  monthly  installments  of $81  including  interest,  due
November 1,  2005,  collateralized  by property  located in  Perryville, MD.....                      10,157             10,433

Note Payable,  9.50%, monthly interest-only payments, due November 1, 2001,
collateralized  by  land located in Camarillo, CA...............................                       7,400              7,400

Mortgage, 9.375%, monthly installments of $71 including interest, due March
1, 2004, collateralized by  property located in Lombard, IL.....................                       6,239              6,507

Mortgage,  7.50%, monthly installments of $29 including interest,  due June
22, 2000, collateralized by property in Knoxville, TN...........................                       3,590              3,666

Other notes payable.............................................................                       3,073                858

Mortgage, 6.915%, monthly installments of $402 including interest, due June
10,  2002, collateralized by property located in  Birch Run, MI.................                           -             47,572

Term  loan,  LIBOR  plus  1.95%,   7.23%  at  December  31,  1998,  monthly
interest-only  payments  through  February 10,  1998;  quarterly  principal  and
monthly interest payments thereafter,  due November 11, 1999,  collateralized by
excess  cash  flow  of  fifteen   properties   located   throughout  the  United
States..........................................................................                           -             45,260

Mortgage,  6.83%, monthly installments of $218 including interest, due June 6,
2006, collateralized  by property in Niagara Falls NY...........................                           -             30,832

Mortgage,  6.93%,  monthly  installments  of $221 including  interest,  due
November  1,  2000, collateralized by property located in Williamsburg, VA......                           -             23,754

Mortgage,  6.91%, monthly installments of $93 including interest,  due June
10, 2001, collateralized  by  property located  in Birch Run, MI................                           -             10,952

Term  loan,  LIBOR  plus  1.95%,   7.23%  at  December 31,   1998,  monthly
interest-only  payments through April 10, 1998;  monthly  principal and interest
payments thereafter,  due February 13, 2000,  collateralized by excess cash flow
of three properties located  throughout the United States.......................                           -              2,688
                                                                                                  ----------         ----------
                                                                                                  $1,227,770         $1,184,607
                                                                                                  ==========         ==========
====================================================================================================================================
</TABLE>

     At December 31, 1999,  unused  commitments  available for borrowings  under
various  loan  facilities  were  $13,546 in the  aggregate.  Interest  costs are
summarized as follows:
<TABLE>
<CAPTION>
 -----------------------------------------------------------------------------------------------------------------------------------
 Years ended December 31,                                                                            1999         1998        1997
 -----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                               <C>          <C>         <C>
 Interest incurred..............................................................                  $94,201      $63,630     $36,436
 Interest capitalized...........................................................                   (4,646)      (5,793)     (4,056)
 Amortization of deferred financing costs and interest
    rate protection contracts...................................................                    4,379        2,867       3,742
                                                                                                  -------      -------     -------

 Interest expense...............................................................                  $93,934      $60,704     $36,122
                                                                                                  =======      =======     =======

 Interest paid..................................................................                  $94,046      $61,114     $36,424
                                                                                                  =======      =======     =======

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

<PAGE>
     The scheduled maturities,  excluding acceleration provisions,  of bonds and
notes payable at December 31, 1999 were as follows:

 -------------------------------------------------------------------------------
 Years ended December 31,
 -------------------------------------------------------------------------------
 2000..........................................................       $ 95,732
 2001..........................................................        229,632
 2002..........................................................         79,666
 2003..........................................................        349,913
 2004..........................................................         53,820
 Thereafter....................................................        451,907
                                                                    ----------
                                                                    $1,260,670
                                                                    ==========
 ===============================================================================

     Bonds and notes payable include unamortized debt premiums of $17,303 in the
aggregate at December 31, 1999. Debt premiums are being amortized over the terms
of the related  debt  instruments  in  accordance  with the  effective  interest
method.  Additionally,  interest incurred reflects amortization of debt premiums
of  $4,406  and  $2,153  for  the  years  ended  December  31,  1999  and  1998,
respectively.  The  aggregate  carrying  amount of bonds and  notes  payable  at
December 31, 1999  approximated  their fair value.  At December  31,  1999,  the
aggregate  carrying  amount of rental property  collateralizing  bonds and notes
payable was $1,738,012.

     On  December  8,  1999,  the  Company   refinanced  the  existing  mortgage
indebtedness on Prime Outlets at Williamsburg (the "Williamsburg Center") with a
$42,500 loan  facility  from a financial  institution.  At closing,  the Company
received an initial funding of $32,500 (the "Initial Funding") and a commitment,
subject to various conditions, for up to $10,000 (the "Final Draw") to finance a
planned expansion to the Williamsburg  Center. The Initial Funding generated net
cash  proceeds  of $9,077  after the  repayment  in full of $22,405 of  existing
mortgage  indebtedness  and closing costs. The Final Draw is expected to be made
in a single advance subject to satisfaction of certain conditions, including the
substantial   completion  of  the  expansion  to  the  Williamsburg  Center.  In
connection with the debt refinancing, the Company incurred an extraordinary loss
of $159,  net of minority  interests  of $40. The loan  facility  consists of an
interim loan (the "Interim Loan") and a permanent loan (the  "Permanent  Loan").
The Interim  Loan (i) bears  interest at 30-day LIBOR plus 2.5%,  (ii)  requires
monthly interest-only  payments,  (iii) is collateralized by a first mortgage on
the Williamsburg  Center, and (iv) matures on January 11, 2002. The Interim Loan
may be  converted  to the  Permanent  Loan  subject to  satisfaction  of certain
conditions.  The Permanent Loan would (i) bear interest at a fixed-rate equal to
prevailing  market rates,  (ii) require monthly  principal and interest payments
pursuant to a 25-year amortization schedule,  (iii) be collateralized by a first
mortgage on the Williamsburg Center, and (iv) have a term of 10 years.

     On November 15, 1999,  the Company  closed on a $20,000  subordinated  loan
(the  "Subordinated  Loan") from an institutional  lender. The Subordinated Loan
(i) bears interest at a fixed-rate of 15.0%, (ii) requires monthly interest-only
payments,  (iii) matures on June 30, 2000,  and (iv) is secured by a pledge of a
security  interest in certain of the Company's  ownership  interests in, and the
available cash flow from five outlet centers,  including Prime Outlets of Puerto
Rico, which is currently under construction.  This collateral is also pledged to
secure  borrowings under the Line of Credit (as defined below).  The Company may
elect,  at its  option,  to extend  the  maturity  of the  Subordinated  Loan to
December 31, 2000.

     On November 12, 1999, the Company closed on $55,000 term loan (the "$55,000
Term  Loan")  from a  financial  institution.  The  $55,000  Term Loan (i) bears
interest at 30-day LIBOR plus 6.0%, (ii) requires monthly principal and interest
payments,  and (iii)  matures in two years.  The $55,000 Term Loan was issued by
Prime Retail Capital I, L.L.C. ("PRC"), a newly-formed  wholly-owned  subsidiary
of Prime  Retail,  L.P.,  and is secured by the excess  cash flow from 15 outlet
centers after the payment of senior debt service and reserves  under an existing
$349,797  first mortgage loan. The $55,000 Term Loan also is secured by a pledge
of PRC's 49.9% limited  partnership  interest in partnerships that own twelve of
those outlet centers and Prime Retail,  L.P.'s 100% equity  interest in PRC. The
$55,000 Term Loan is unconditionally  guaranteed by Prime Retail, L.P. and Prime
Retail,  Inc. The Company used the net cash  proceeds from the $55,000 Term Loan
to repay  $40,944  of  short-term  indebtedness  and to repay a  portion  of the
borrowings under the Line of Credit.
<PAGE>
     On September 29, 1999, the Company received $40,000 of proceeds from a line
of credit facility (the "Line of Credit") with a group of institutional lenders.
These proceeds were used to repurchase the Company's  Series C Preferred  Stock.
The Line of Credit (i) bore  interest at a fixed-rate  of 11.0%,  (ii)  required
monthly  interest-only  payments,  and (iii) matured in nine months. The Line of
Credit was repaid in full on November 19, 1999. In connection with the repayment
of the Line of Credit,  the Company incurred an extraordinary  loss on the early
extinguishment  of debt of $717, net of minority  interests of $179. The lenders
are entitled to receive a cash payment that  increases  their  internal  rate of
return with respect to amounts  advanced  under such  facility by 4.0% per annum
(the "Cash Payment"). Lenders under the Line of Credit also received warrants to
purchase  a  5%  interest  in  the  Company's   e-commerce   subsidiary,   which
subsequently  ceased  all  operations  effective  April 12,  2000 (see Note 14 -
"Subsequent Event").

     On July 11,  1999,  the  Company's  $20,000  unsecured  line of credit (the
"Corporate  Line") was renewed  and  increased  to  $25,000.  The purpose of the
Corporate  Line is to provide  working  capital  to  facilitate  the  funding of
short-term  operating  cash needs of the Company.  The  Corporate  Line bears an
interest  rate of 30-day  LIBOR plus  2.50% and  matures  on July 11,  2000.  At
December 31, 1999, the Corporate Line had an  outstanding  principal  balance of
$22,175.

     On April 27, 1999,  the Company  closed on a $63,000 debt  financing with a
financial institution that provided  approximately $27,900 of net proceeds.  The
$63,000  note is (i)  collateralized  by a first  mortgage  on Prime  Outlets at
Niagara Falls USA, (ii) bears interest at a fixed rate of 7.604%, (iii) requires
monthly   principal  and  interest  payments  of  $450  pursuant  to  a  30-year
amortization schedule, and (iv) matures in 10 years. In connection with the debt
refinancing,  the Company incurred an extraordinary loss on early extinguishment
of debt of $2,106, net of minority interests of $534.

     As of December 31, 1999, the Company is a guarantor or otherwise  obligated
with  respect to an aggregate of $12,722 of the  indebtedness  of Horizon  Group
Properties, Inc. and its affiliates ("HGP") including a $10,000 obligation under
HGP's  secured  credit  facility  which  bears a rate of  interest of LIBOR plus
1.90%,  matures in July 2001, and is collateralized by seven properties  located
throughout the United States.

     On April 1, 1998,  Horizon  consummated  an  agreement  with Castle & Cooke
Properties,  Inc. which released Horizon from its future  obligations  under its
long-term  lease of the Dole  Cannery  outlet  center in  Honolulu,  Hawaii,  in
connection  with the  formation of a joint  venture with certain  affiliates  of
Castle & Cooke,  Inc.  ("Castle & Cooke") to operate  such  property.  Under the
terms of the  agreement,  Castle & Cooke  Properties,  Inc., the landlord of the
project and an affiliate of Castle & Cooke, released Horizon from any continuing
obligations  under the lease,  which  expires in 2045, in exchange for Horizon's
conveyance to the joint venture of its rights and obligations  under such lease.
The  agreement  also  provided  that  Horizon  transfer  to such  joint  venture
substantially  all of Horizon's  economic  interest in its outlet center in Lake
Elsinore,  California  together  with  legal  title to vacant  property  located
adjacent  to the center.  As of  December  31,  1999,  the Company  held a small
minority  interest in the joint venture but has no obligation or commitment with
respect to the  post-closing  operations of the Dole Cannery  project.  Mortgage
indebtedness  with an  outstanding  balance of $28,938 at December 31, 1999, for
which one of the Company's subsidiary  partnerships remains legally responsible,
is  collateralized  by a first mortgage on the Lake Elsinore outlet center.  The
joint venture, as a limited partner in such subsidiary partnership, is obligated
to  make  capital  contributions  to  the  partnership  to pay  debt  financing,
operating  and  other   expenses  under  certain   conditions.   The  subsidiary
partnership  will remain  legally  responsible  for such expenses in case of any
shortfalls  by the joint  venture with  respect to such  capital  contributions.
Castle & Cooke has  provided  the Company with an  unconditional  guaranty  with
respect to any such shortfalls.

Debt Covenants

     Certain of the Company's debt obligations  require  compliance with various
financial  loan covenants  including,  but not limited to, those relating to the
Company's (i) total outstanding variable interest rate indebtedness,  (ii) total
outstanding  indebtedness to total market value, as defined,  (iii) consolidated
net worth, as defined,  and (iv) debt service and fixed charge coverage  ratios,
as defined.

     As a result of its  financial  results for the quarter  ended  December 31,
1999, the Company is not in compliance  with a financial  covenant  contained in
two of its credit  facilities,  the  Subordinated  Loan and a $40,000  unsecured
revolving loan (the "Unsecured  Revolving Loan").  Neither of the loans has been
accelerated  nor was notice of the respective  lender's  intention to accelerate
the maturity of the loans received by the Company.  The Company  entered into an
amendment  to the  Subordinated  Loan on  February  23,  2000  which  waived the
covenant  violation as of December  31, 1999 and  modified  the  covenant  terms
through the  Subordinated  Loan's  maturity  date.  The Company is  currently in
discussions  with the Unsecured  Revolving Loan lender to obtain a waiver and/or
amend the loan;  however,  there can be no  assurance as to whether and when the
Company will obtain any such waiver or  amendment.  Furthermore,  the  Company's
failure to obtain from its  independent  auditor's  an  unqualified  report with
respect to its consolidated  financial statements will also constitute a default
under these two credit facilities.
<PAGE>
     In addition, noncompliance with the covenants described above has triggered
certain  cross-default  provisions with respect to several of the Companys other
debt instruments, including the Subordinated Loan, the $55,000 Term Loan and the
Fixed Rate Bonds.  None of these loans have been accelerated nor was a notice of
the respective lender's intent to accelerate received by the Company. Management
is currently in discussion  with the affected  lenders to obtain a resolution of
the cross-default  provisions. If the Company is unable to obtain such waiver or
amendment to the  Unsecured  Revolving  Loan and reach  resolution  with certain
other lenders,  the Company will look to (i) obtain  alternative  financing from
other  financial  institutions,  or (ii) the potential sale of assets or a joint
venture  interest  in  certain  outlet  centers  as sources of cash to repay the
amounts  outstanding under such loans.  This condition raises  substantial doubt
about the  Company's  ability to  continue  as a going  concern.  The  financial
statements 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  this
uncertainty.

     Although the Company continues to maintain its regularly scheduled payments
under all of its indebtedness,  there can be no assurance that one or all of the
affected  lenders will not declare a default and accelerate the maturity of such
indebtedness.  Additionally,  there can be no assurance that the Company will be
in compliance  with its  financial  debt  covenants in future  periods since the
Company's  future  financial   performance  is  subject  to  various  risks  and
uncertainties,  including but not limited to, the effects of increases in market
interest rates from current levels;  the risk of potential  increases in vacancy
rates and the resulting  impact on the Company's  revenue;  and risks associated
with refinancing the Company's  current debt obligations or obtain new financing
under terms as favorable as the Company has experienced in prior periods.

Note 7 - Minority Interests

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

     During 1999 and 1998, 471,923 and 975,462 Common Units, respectively,  were
exchanged for shares of Common Stock. As of December 31, 1999, 10,840,208 Common
Units were issued and outstanding. Minority interests also includes interests in
two property  partnerships that are not wholly owned by the Company.  During the
years ended December 31, 1999, 1998 and 1997, expenses totaling $11,752, $3,035,
and $1,468,  respectively,  related  solely to the operation of the Company were
allocated only to the common  shareholders.  Such  allocation is consistent with
the federal and state tax treatment of these expenses.

     During  the year  ended  December  31,  1999,  cash  distributions  paid to
minority  interest totaled  $12,976,  minority  interests  conversions to common
stock totaled $6,990 and income allocated to minority  interests totaled $2,339,
net of an $887 allocation of  extraordinary  losses.  In addition,  the minority
interests'  balance was reduced by $3,351 in connection with the sale of a joint
venture  property.  During the years  ended  December  31,  1999 and 1997,  cash
distributions  and losses allocated to minority  interests  reduced the minority
interests'  balance related to Common Units to zero. After reducing the minority
interests' balance to zero, all cash  distributions  related to Common Units are
treated as income allocated to minority interests.

     At  December  31,  1999  and  1998,  loans  to  certain  limited  partners,
aggregating  $1,188 and $2,375,  respectively,  were  reported as a reduction in
minority interests in the Consolidated Balance Sheets.
<PAGE>
Note 8 - Shareholders' Equity

     The Company is authorized to issue up to (i)  150,000,000  shares of common
stock and (ii) 24,315,000  shares of preferred  stock in one or more series.  At
December 31, 1999, 43,368,620 shares of common stock, 2,300,000 shares of Senior
Preferred  Stock and 7,828,125  shares of Series B Convertible  Preferred  Stock
were issued and outstanding.

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

     Dividends on the Senior Preferred Stock are payable quarterly in the amount
of $2.625 per share per annum.  Dividends on the Series B Convertible  Preferred
Stock are payable  quarterly at the greater of (i) $2.125 per share per annum or
(ii) the dividends on the number of shares of Common Stock into which a share of
Series B Convertible Preferred Stock will be convertible at the conversion price
of $20.90 per share of Common Stock. At December 31, 1999,  there were 9,363,786
shares of Common  Stock  reserved for future  issuance  upon  conversion  of the
Series B Convertible Preferred Stock.

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

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

     During the year ended  December 31, 1999, a redemption  discount of $13,338
representing  the excess of the carrying  amount of the Series C Preferred Stock
over its  redemption  amount is  reflected  in the  Consolidated  Statements  of
Operations as a loss allocated to preferred shareholders.

     In order to qualify as a Real Estate  Investment Trust ("REIT") for federal
income tax purposes,  the Company is required to pay distributions to its common
and  preferred  shareholders  of at least  95.0% of its REIT  taxable  income in
addition to satisfying other requirements.  Although the Company intends to make
distributions  in accordance with the  requirements of the Internal Revenue Code
of 1986,  as amended,  it also  intends to retain such  amounts as it  considers
necessary from time to time for capital and liquidity needs of the Company.

     The Company's current policy with respect to common stock  distributions is
to only make  payments to the extent  necessary to maintain its status as a REIT
for federal income tax purposes.  Based on the Company's  current federal income
tax projections, it does not expect to pay any distributions on its common stock
or common units of limited  partnership  interest in Prime Retail,  L.P.  during
2000. With respect to  distributions on the Company's Senior Preferred Stock and
Series B Convertible  Preferred Stock, the Board of Directors considered and did
not declare a quarterly  distribution  on such preferred  stock due February 15,
2000.  The Board of Directors will continue to evaluate the payment of preferred
stock  distributions  on a quarterly  basis. The holders of the Senior Preferred
Stock and Series B Convertible Preferred Stock, each series voting separately as
a class,  have the right to elect two additional  members to the Company's Board
of Directors if the equivalent of six consecutive  quarterly  dividends on these
series of preferred  stock are in arrears.  Each of such two  directors  will be
elected to serve until the earlier of (i) the election and qualification of such
directors' successor, or (ii) payment of the dividend arrearage.

     The Company is currently prohibited under the terms of more than one of its
credit  agreements  from  paying  dividends  or  distributions  as a  result  of
non-compliance with a financial covenant (see Note 6 - "Bonds and Notes Payable"
of the Notes to  Consolidated  Financial  Statements.)  The  Company may make no
distributions  to its common  shareholders  unless it is current with respect to
distributions to its preferred  shareholders.  In addition, the Company may make
no distributions to its common shareholders unless it is current with respect to
distributions to its preferred shareholders.  Annualized cumulative dividends on
the Company's  Senior  Preferred Stock and Series B Convertible  Preferred Stock
outstanding as of December 31, 1999 are $6,038 and $16,636, respectively.

<PAGE>

Note 9 - Stock Incentive Plans

     Under various  plans,  the Company may grant stock options and other awards
to executive officers,  other key employees,  outside directors and consultants.
The  exercise  price for stock  options  granted is the fair market value of the
Company's common stock on the date of grant.

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

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

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

------------------------------------------------------------------------------------------------------------------------------------
Years ended December 31,                                                                    1999            1998            1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>             <C>             <C>
Income (loss) before extraordinary loss.........................................        $(31,376)       $ 15,348        $  7,442
Extraordinary loss..............................................................          (3,518)              -          (2,061)
                                                                                        --------        --------        --------
Net income (loss)...............................................................        $(34,894)       $ 15,348        $  5,381
                                                                                        ========        ========        ========
Net loss applicable to common shares............................................        $(44,856)       $ (9,256)       $ (7,345)
                                                                                        ========        ========        ========
Basic earnings per common share:
    Loss before extraordinary loss..............................................        $  (0.96)       $  (0.26)       $  (0.27)
    Extraordinary loss..........................................................           (0.08)              -           (0.11)
                                                                                        --------        --------        --------
    Net loss....................................................................        $  (1.04)       $  (0.26)       $  (0.38)
                                                                                        ========        ========        ========

Diluted earnings per common share:
    Loss before extraordinary loss..............................................        $  (1.22)       $  (0.26)       $  (0.27)
    Extraordinary loss..........................................................           (0.08)              -           (0.11)
                                                                                        --------        --------        --------
    Net loss....................................................................        $  (1.30)       $  (0.26)         $(0.38)
                                                                                        ========        ========        ========

====================================================================================================================================
</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,                                                                 1999          1998          1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>           <C>           <C>

Risk-free interest rate.........................................................         6.4%          5.0%          5.5%
Dividend yield..................................................................        21.0%         12.0%          8.3%
Volatility factor...............................................................        0.37          0.36          0.36
Weighted average life (in years)................................................        10.0          10.0          10.0

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

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

------------------------------------------------------------------------------------------------------------------------------------
                                                       1999                             1998                                 1997
                                ----------------------------------------------------------------------------------------------------
                                                    Weighted                         Weighted                              Weighted
                                                     Average                          Average                               Average
                                                    Exercise                         Exercise                              Exercise
                                     Shares          Price            Shares          Price             Shares               Price
------------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>                <C>            <C>               <C>               <C>                 <C>
Beginning of year..........        3,811,067          $14.90         1,148,250         $15.64            903,500             $16.49
Granted....................           85,000            9.85         1,724,575          13.10            246,250              12.53
Transferred (Horizon)......                -               -           959,742          18.62                  -                  -
Cancelled..................         (615,750)          18.37           (21,500)         12.64             (1,500)             11.88
                                   ---------          ------         ---------         ------          ---------             ------

End of year................        3,280,317          $14.12         3,811,067         $14.90          1,148,250             $15.64
Exercisable -                      =========          ======         =========         ======          =========             ======
   end of year.............        2,900,314          $14.22         3,083,570         $15.24          1,017,753             $15.18
                                   =========          ======         =========         ======          =========             ======
====================================================================================================================================
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
                                                      Options Outstanding                                Options Exercisable
                                     -----------------------------------------------------------------------------------------------
                                                              Weighted            Weighted                                 Weighted
                                                               Average             Average                                  Average
             Range of                                        Remaining            Exercise                                 Exercise
          Exercise Price                     Shares        Life in Years            Price                 Shares             Price
------------------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>                    <C>                 <C>                <C>                  <C>
               $8.50...........              60,000              9.6                 $8.50                 60,000             $8.50
$11.15 to $13.09...............           2,574,417              7.8                 12.60              2,274,414             12.53
$13.60 to $14.19...............             262,490              7.8                 13.91                182,490             13.78
              $19.00...........              35,000              4.2                 19.00                 35,000             19.00
              $23.53...........              13,788              6.3                 23.53                 13,788             23.53
$24.55 to $26.53...............             334,622              0.4                 26.11                334,622             26.11
                                          ---------              ---                ------              ---------            ------
                                          3,280,317              7.0                $14.12              2,900,314            $14.22
                                          =========              ===                ======              =========            ======

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

     The weighted fair value of options  granted during the years ended December
31,  1999,  1998 and 1997 was $0.96 per share,  $0.96 per  share,  and $1.90 per
share, respectively.  Under the Company's various plans there were 2,279,425 and
1,748,675  shares  reserved  for future  grants at  December  31, 1999 and 1998,
respectively.

Note 10 - Lease Agreements

     The Company is the lessor of retail and office space under operating leases
with lease terms that expire from 2000 to 2016.  Most leases are  renewable  for
five years at the lessee's option. Future minimum base rent to be received under
noncancelable operating leases as of December 31, 1999 were as follows:

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

 2000................................................................   $160,132
 2001................................................................    131,169
 2002................................................................     97,458
 2003................................................................     66,123
 2004................................................................     36,213
 Thereafter..........................................................     51,211
                                                                        --------
                                                                        $542,306
                                                                        ========

 ===============================================================================
<PAGE>
     The Company leases  certain land,  buildings,  and equipment  under various
noncancelable  operating lease  agreements.  Rental expense for operating leases
was $3,699,  $1,818, and $1,059 for the years ended December 31, 1999, 1998, and
1997,  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, 1999  consisted  of the
following:

 -------------------------------------------------------------------------------
 Years ended December 31,
 -------------------------------------------------------------------------------
 2000.............................................................        $3,445
 2001.............................................................         3,376
 2002.............................................................         3,130
 2003.............................................................         2,533
 2004.............................................................         1,525
                                                                         -------
                                                                         $14,009
                                                                         =======
 ===============================================================================

<PAGE>

Note 11 - Prime/Estein Joint Venture Transaction

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

     On November  19,  1999,  the  Company  successfully  completed  the initial
installment of the Prime/Estein  Joint Venture Agreement  consisting of the sale
of Prime  Outlets at Birch Run to the Venture  for  aggregate  consideration  of
$117,000,  including  a $64,500  "wrap-around"  first  mortgage  provided by the
Company.  In connection with the sale of Prime Outlets at Birch Run, the Company
received cash proceeds of $33,303,  net of transaction costs and recorded a loss
on the sale of real estate of $9,326.  Effective  November 19, 1999, the Company
commenced  accounting for its 30.0% ownership interest in Prime Outlets at Birch
Run in accordance with the equity method of accounting.  The "wrap-around" first
mortgage  provided by the Company to the Venture has a ten-year  term at a fixed
interest  rate of 7.75%  requiring  monthly  payments of principal  and interest
pursuant to a 25-year amortization schedule. The Company's net investment in the
"wrap-around"  first  mortgage  as of December  31,  1999 was  $10,745  which is
included in other assets in the Consolidated  Balance Sheet.  Additionally,  the
Venture assumed $53,755 of outstanding  mortgage  indebtedness.  Included in the
aggregate    consideration    is   a    $5,500    payment    related    to   the
covenant-not-to-compete and a $3,000 payment related to the licensing agreement.
The payments to the Company for the  covenant-not-to-compete  and the  licensing
agreement  are  included  in  accounts  payable  and  other  liabilities  in the
Consolidated Balance Sheet and will be amortized into income over their ten-year
lives.

     During the fourth quarter of 1999, the Company  recorded a loss on the sale
of real estate of $5,827  related to the  write-down  of the  carrying  value of
Prime  Outlets  at  Williamsburg  based on the terms of the  Prime/Estein  Joint
Venture  Agreement.  On February  23,  2000,  the Company  completed  the second
installment of the Prime/Estein  Joint Venture Agreement  consisting of the sale
of Prime Outlets at Williamsburg to the Venture for aggregate  consideration  of
$59,000,  including (i) the assumption of mortgage indebtedness of $32,500, (ii)
a $1,250  payment  related  to the  covenant-not-to-compete  and  (iii) a $1,500
payment related to the licensing agreement. In connection with the sale of Prime
Outlets at Williamsburg,  the Company received (i) cash proceeds of $11,063, net
of  transaction  costs and (ii) a promissory  note in the amount of $10,000 from
the Venture (of which Estein's obligation is $7,000),  such amount to be payable
on or before the earlier of the closing of the proposed  sale of an expansion of
the  Williamsburg  center or December 31, 2000. The promissory note requires the
monthly payment of interest in arrears at an annual rate of 7.75%.  Although the
Company  expects to close on the sale of Prime Outlets at Hagerstown,  including
the expansion scheduled to open during the second quarter of 2000, for aggregate
consideration of approximately  $80,500 on or about May 15, 2000,  completion of
this  transaction,  remains  subject to various  conditions  and there can be no
assurance  as to whether or when this  transaction  will be  consummated.  As of
December 31, 1999, the Company  classified  $97,639  representing  the aggregate
carrying value of Prime Outlets at Williamsburg  and Prime Outlets at Hagerstown
(collectively,  the "Held for Sale  Properties")  as assets held for sale in its
Consolidated  Balance  Sheet.  Total revenues and expenses for the Held for Sale
Properties were $16,243 and $12,185,  respectively,  for the year ended December
31, 1999.
<PAGE>
Note 12 - Special Charges

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

     The operating results for the Company's  Designer  Connection outlet stores
are reflected in loss on Designer  Connection in the Consolidated  Statements of
Operations for all periods presented.  When accounting for the fourth quarter of
1999,  the  Company  decided  to  discontinue  the  operations  of its  Designer
Connection  outlet  stores.  Accordingly,  the  Company  recorded  non-recurring
charges  aggregating  $3,659  including  (i) $1,659  related to the write-off of
costs  associated  with a web-site  for Designer  Connection  and (ii) $2,000 of
costs to cover the expected cash and non-cash costs of the closure. The cash and
non-cash  costs of the closure  primarily  consists of (i) employee  termination
costs, (ii) lease  obligations,  and (iii) the write-down of assets to their net
realizable  value.  The Company  expects  that the  operations  of its  Designer
Connection outlet stores will cease by July 31, 2000.

Note 13 - Legal Proceedings

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

     Company and its  affiliates are defendants in a lawsuit filed on August 10,
1999 in the Circuit Court for Baltimore City and removed to U.S.  District Court
for the  District of Maryland on August 20, 1999.  The lawsuit  alleges that the
Company and its related entities overcharged tenants for common area maintenance
charges and promotion fund charges.  The outcome of, and the ultimate  liability
of the Company,  if any,  from,  this  lawsuit  cannot  currently be  predicted.
Management  believes  that the Company has acted  properly and intends to defend
this lawsuit vigorously.

     The New York Stock  Exchange  has notified the Company that it is reviewing
transactions in the stock of the Company prior to the Company's  January 18,2000
press release concerning financial matters.

Note 14 - Subsequent Event

     On April  12,  2000,  the  Company  announced  that it has been  unable  to
conclude an  agreement  to transfer  ownership  of its  wholly-owned  e-commerce
subsidiary,   primeoutlets.com   inc.,   also  known  as   eOutlets.com,   to  a
management-led  investor group comprised of eOutlets.com  management and outside
investors. Effective April 12, 2000, eOutlets.com ceased all operations.

     In connection with the discontinuance of eOutlets.com,  the Company expects
to incur a non-recurring  loss of approximately  $13,000 in the first quarter of
2000.  The  non-recurring  loss  includes  (i) the  write-off of $3,500 of costs
capitalized during 1999 and (ii)  approximately  $9,500 of costs incurred during
2000,   including  costs  associated  with   discontinuing   the  operations  of
eOutlets.com.  In addition,  during 1999 the Company incurred expenses of $3,500
related to organizational and other start-up  expenditures of eOutlets.com which
are  reflected  in  corporate   general  and   administrative   expense  in  the
Consolidated Statements of Operations.

<PAGE>
                               PRIME RETAIL, INC.

            SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 1999
                                 (in thousands)
<TABLE>
<CAPTION>
       Costs Capitalized
                                      Initial Cost      Subsequent to    Gross Amount at Which
                                        to Company       Acquisition    Carried at Close of Period
                                      ---------------  ---------------  ---------------------------
                                              Bldgs &         Bldgs &          Bldgs &               Accum.         Constructed (C)
Description             Encumbrances   Land   Improve  Land   Improve     Land   Improve     Total   Depreciation      Acquired (A)
------------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>      <C>     <C>       <C>     <C>       <C>    <C>       <C>         <C>              <C>
Prime Outlets at Anderson   $ 8,755    $1,125   $11,036  $ -    $  443    $1,125  $11,479   $12,604      $  641         Dec. 1997(A)

Prime Outlets at Bend         7,737     2,560     8,476  1,101   4,629     3,661   13,105    16,766         910         Feb. 1997(A)

Prime Outlets at             14,571     3,694    21,370    -       205     3,694   21,575    25,269       1,393         June 1998(A)
Burlington

Prime Outlets at Calhoun     17,816     3,839    24,551    -       164     3,839   24,715    28,554       1,785         June 1998(A)

Prime Outlets at Castle
Rock                         35,317     4,424    47,200  2,717  15,615     7,141    62,815   69,956      11,330         Mar. 1994(A)

Prime Outlets at Conroe      17,397       405    18,714    -       304       405    19,018   19,423       1,419         June 1998(A)

Prime Outlets at Darien      24,890         -         -  3,004  31,424     3,004    31,424   34,428       6,267         July 1995(C)

Prime Outlets at Edinburgh   17,347     2,726    37,952      -   1,671     2,726    39,623   42,349       2,652         June 1998(A)

Prime Outlets at Ellenton    28,926         -         -  5,457  49,073     5,457    49,073   54,530       9,078         Oct. 1991(C)

Prime Outlets at Florida     15,360         -         -  2,875  21,603     2,875    21,603   24,478       5,004        Sept. 1994(C)
City

Prime Outlets at Fremont     14,005     3,250    24,096      -      94     3,250    24,190   27,440       1,495         Jun. 1998(A)

Prime Outlets at Gaffney     31,209         -         -  1,886  32,979     1,886    32,979   34,865       4,449         Nov. 1996(C)

Prime Outlets at
Gainesville                  20,462         -         -    535  30,494       535    30,494   31,029       7,307         Aug. 1993(C)

Prime Outlets at Gilroy      73,293    21,173    95,534      4   1,011    21,177    96,545  117,722       4,727         June 1998(A)

Prime Outlets at Grove
City                         40,586    1,123     58,630      -   3,499     1,123    62,129   63,252       7,450         Nov. 1996(A)

Prime Outlets at Gulfport    19,620        -          -      -  34,307         -    34,307   34,307       5,670         Oct. 1995(C)

Prime Outlets at Hillsboro   30,718    7,121     50,894      -     329     7,121    51,223   58,344       2,805         June 1998(A)

Prime Outlets at Huntley     17,490        -          -  1,506  35,159     1,506    35,159   36,665       6,708        Sept. 1994(C)

Prime Outlets at
Jeffersonville  I            26,067      843     31,084    250  15,216     1,093    46,300   47,393       8,907         Mar. 1994(A)

Prime Outlets at
Jeffersonville  II           19,299      174     21,058      - (13,467)      174     7,591    7,765       1,669         Jun. 1998(A)

Prime Outlets at Kenosha     23,942    6,995     39,558      -   1,154     6,995    40,712   47,707       2,557         Jun. 1998(A)

Prime Outlets of Kittery     12,134      820     24,061      -   1,301       820    25,362   26,182       1,366         Oct. 1997(A)

Prime Outlets at Latham       1,453      507      1,476      -      23       507     1,499    2,006          80         Oct. 1997(A)

Prime Outlets at Lebanon     19,952        -          -  2,689  30,928     2,689    30,928   33,617       2,568         Apr. 1998(C)

Prime Outlets at Lee         26,855    8,035     31,656      -   1,343     8,035    32,999   41,034        3,162        Jun. 1998(A)

Prime Outlets at Lodi        25,912    1,013     21,455    707  13,825     1,720    35,280   37,000        3,702       Sept. 1997(A)

Prime Outlets at Loveland    22,410    6,400     33,244      -     121     6,400    33,365   39,765        5,052        Nov. 1996(A)

Melrose Place                 2,000        -          -    499   1,884       499     1,884    2,383          829        Aug. 1987(C)

Prime Outlets at Michigan
City                         50,574    7,241     77,027      -     831     7,241    77,858   85,099        4,525        June 1998(A)

Prime Outlets at
Morrisville                   9,256       -           -  2,502   21,720    2,502    21,720   24,222        6,054        Oct. 1991(C)

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                               PRIME RETAIL, INC.

      SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION (continued)
                                December 31, 1999
                                 (in thousands)

                                                      Costs Capitalized
                                      Initial Cost      Subsequent to    Gross Amount at Which
                                        to Company       Acquisition    Carried at Close of Period
                                      ---------------  ---------------  ---------------------------
                                              Bldgs &         Bldgs &          Bldgs &               Accum.         Constructed (C)
Description             Encumbrances   Land   Improve  Land   Improve     Land   Improve     Total   Depreciation      Acquired (A)
------------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>      <C>     <C>       <C>     <C>       <C>    <C>       <C>         <C>              <C>

Prime Outlets at Naples  $10,651    $2,753   $15,602     $5   $2,769     $2,758  $18,371  $21,129       $2,604          Mar. 1994(A)

Prime Outlets at Niagara
Falls USA                 62,693     7,247    82,842      -    1,247      7,247   84,089   91,336        4,586          Dec. 1997(A)

Northgate Plaza            6,239     3,626    11,630      -      149      3,626   11,779   15,405        1,964          Mar. 1994(A)

Prime Outlets at Odessa   14,351       815    31,311      -    1,611        815   32,922   33,737        5,088          Nov. 1996(A)

Prime Outlets at Oshkosh  14,417     2,160    26,895      -      431      2,160   27,326    29,486       2,164          June 1998(A)

Prime Outlets at
Perryville                10,157     3,089   16,287       -      152      3,089   16,439    19,528         938          June 1998(A)

Prime Outlets at Pismo
Beach                     13,007     9,048   17,617       -      147      9,048   17,764    26,812       1,145          June 1998(A)

Prime Outlets at Post
Falls                     11,509     3,100   12,163       -      103      3,100   12,266    15,366       1,003          Feb. 1997(A)

Prime Outlets at
Queenstown                18,923     4,422   35,592       -      674      4,422   36,266    40,688       1,831          June 1998(A)

Prime Outlets at San
Marcos                    41,840         -        -    6,091   57,449     6,091   57,449    63,540      12,690          Aug. 1990(C)

Prime Outlets at Sedona    6,867     1,924    9,099      750      146     2,674    9,245    11,919         707          Feb. 1997(A)

Prime Outlets at
Silverthorne              25,562     9,294   34,932        -      323     9,294   35,255    44,549       2,112          June 1998(A)

Prime Outlets at Tracy    13,245     6,170   16,715        -      254     6,170   16,969    23,139       1,301          June 1998(A)

Prime Outlets at Vero
Beach                     26,950     4,530   41,878        -    2,543     4,530   44,421    48,951       3,456          Jun. 1998(A)

Prime Outlets at
Warehouse Row             23,900         -        -    1,175   33,032     1,175   33,032    34,207      12,287          Nov. 1989(C)

Prime Outlets at Waterloo 40,733     1,927   60,658        -      613     1,927   61,271    63,198       3,802          June 1998(A)

Western Plaza             10,590         -        -    2,000    7,246     2,000    7,246     9,246       1,496          June 1993(A)

Prime Outlets at Woodbury 17,967     2,528   27,645        -     (306)    2,528   27,339    29,867       1,477          June 1998(A)

Property Under Development 7,400         -        -        -   66,581         -   66,581    66,581           -          Under
                                                                                                                        Construction
Other Property                 -         -    1,588        -   10,126         -   11,714    11,714       1,742          Mar. 1994 -
                     -----------  -------- ---------- ------  -------- -------- ---------- ---------   --------         Dec. 1998(A)

                     $ 1,052,354  $146,101 $1,121,526 $35,753 $523,171 $181,854 $1,644,697 $1,826,551  $183,954
                     ===========  ======== ========== ======= ======== ======== ========== ==========  ========


</TABLE>

     At December  31, 1999,  the Company had two  properties,  Prime  Outlets at
Hagerstown and Prime Outlets at Williamsburg, classified as held for sale with a
combined  value of $97,639.  The two  properties  have mortgage notes payable of
$71,060 outstanding at December 31, 1999.

<PAGE>

                               PRIME RETAIL, INC.

        Notes to Schedule III - Real Estate and Accumulated Depreciation

                                December 31, 1999

                                 (in thousands)

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

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

     The  aggregate  cost for federal  income tax  purposes  was  $1,719,218  at
December 31, 1999.

<TABLE>
<CAPTION>
                                                                                               Investment in Rental Property
                                                                                                  Year Ended December 31
                                                                                      ------------------------------------------
                                                                                              1999            1998          1997
                                                                                      ------------   -------------  ------------
<S>                                                                                     <C>             <C>             <C>
Balance, beginning of year......................................................        $2,015,722        $904,782      $640,759
Retirements.....................................................................            (4,727)           (880)         (718)
Acquisitions....................................................................                 -       1,013,231       191,345
Improvements....................................................................            89,969         145,174        73,773
Dispositions....................................................................          (138,321)        (46,585)         (377)
Transfer to assets held for sale................................................          (108,968)              -             -
Provision for asset impairment on rental properties.............................           (13,572)              -             -
Provision for abandoned projects on rental properties...........................           (13,552)              -             -
                                                                                        ----------      ----------     ---------
Balance, end of year............................................................        $1,826,551      $2,015,722      $904,782
                                                                                        ==========      ==========     =========
</TABLE>
<TABLE>
<CAPTION>




                                                                                                  Accumulated Depreciation
                                                                                                    Year Ended December 31
                                                                                        -----------------------------------------
                                                                                              1999            1998           1997
                                                                                        ------------   -------------  ------------
<S>                                                                                     <C>              <C>            <C>
Balance, beginning of year......................................................          $127,747         $82,033       $57,674
Retirements.....................................................................            (4,727)           (880)         (718)
Other...........................................................................               346             134            22
Dispositions....................................................................            (6,787)         (5,178)            -
Transfer to assets held for sale................................................            (5,502)              -             -
Depreciation for the year.......................................................            72,877          51,638        25,055
                                                                                         ---------        --------       -------
Balance, end of year............................................................          $183,954        $127,747       $82,033
                                                                                         =========        ========       =======

</TABLE>