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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 1, 1996
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Prime Retail, Inc.
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(Exact name of registrant as specified in its charter)
Maryland 0-23616 52-1836258
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(State of other jurisdiction of (Commission File (IRS Employer
incorporation) Number) Identification No.)
100 East Pratt Street
Nineteenth Floor, Baltimore, Maryland 21202
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (410) 234-0782
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No Change
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(Former name or former address, if changed since last report)
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PRIME RETAIL, INC.
ITEM 2: Acquisition or Disposition of Assets
Reference is made to the Press Release dated November 4, 1996 attached
hereto as Exhibit 10.1 and incorporated by reference herein.
ITEM 5: Other Events
Reference is made to the Press Release dated November 4, 1996 attached
hereto as Exhibit 10.1 and incorporated by reference herein.
ITEM 7: Financial Statements and Exhibits
A. Financial Statements of Businesses Acquired:
Pursuant to Item 7(a)(4) of the Form 8-K, the Company
states that it is impracticable to file the required
audited financial statements covering the most recent
fiscal year and the unaudited interim financial
information for the real estate properties acquired at the
time this report is filed. Such financial information is
expected to be filed on or before December 31, 1996.
B. Pro Forma Financial Information:
Pursuant to Item 7(b)(2) of the Form 8-K, the Company
states that it is impracticable to file the required pro
forma financial information at the time this report is
filed. Such pro forma financial information is expected to
be filed on or before December 31, 1996.
C. Exhibits:
Description Exhibit
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Press Release dated November 4, 1996 10.1
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PRIME RETAIL, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIME RETAIL, INC.
(Registrant)
Dated: November 5, 1996
By: /s/ Robert P. Mulreaney
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Name: Robert P. Mulreaney
Title: Executive Vice President,
Chief Financial Officer
and Treasurer
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EXHIBIT INDEX
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Exhibit
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Press Release dated November 4, 1996 10.1
FOR IMMEDIATE RELEASE FOR MORE INFORMATION
November 4, 1996 Contact: Robert P. Mulreaney
Chief Financial Officer
Kathy M. Kirn
Director, Public Relations
(410) 234-0782
PRIME RETAIL CLOSES $428.3 MILLION LOAN REFINANCING,
PURCHASES TWO FACTORY OUTLET CENTERS AND
PURCHASES REMAINING INTEREST IN GROVE CITY FACTORY SHOPS
BALTIMORE - Prime Retail, Inc. ("Prime Retail" or the "Company") (NASDAQ:
PRME, PRMEP) today announced the closing of a refinancing of a substantial
portion of its debt and certain purchases of assets that occurred on November 1,
1996. First, the Company completed a previously announced debt refinancing with
Nomura Asset Capital Corporation ("Nomura") that provided approximately $428.3
million of loan proceeds. Second, the Company purchased Rocky Mountain Factory
Stores and Kansas City Factory Outlets from an unrelated third party for
approximately $71.3 million. Third, the Company completed its previously
announced agreement to purchase the first mortgage and 50.0% equity interest of
its joint venture partner in Grove City Factory Shops.
NOMURA LOAN REFINANCING
On November 1, 1996, Prime Retail closed on $428.3 million of loan
facilities with Nomura. The transaction provided (i) a $319.0 million
non-recourse first mortgage loan (the "First Mortgage Loan") for sixteen of the
Company's factory outlet centers (including Rocky Mountain Factory Stores,
Kansas City Factory Outlets and Grove City Factory Shops), (ii) a $40.0 million
non-recourse expansion loan (the "Expansion Loan"), (iii) a junior secured loan
(the "Repo Financing") of $53.3 million, and (iv) a short-term unsecured loan of
$16.0 million (the "Unsecured Loan").
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PRIME RETAIL CLOSES THREE TRANSACTIONS Page 2
The First Mortgage Loan and the Expansion Loan (i) are
cross-collateralized by first mortgages on sixteen of the Company's factory
outlet centers, (ii) bear a variable interest rate of 30-day LIBOR plus 1.51%
during the first two years and a fixed interest rate of 7.782% for the balance
of the seven-year term, and (iii) require monthly principal and interest
payments pursuant to a level payment 360 - month amortization schedule. The
Company has amended certain interest rate protection contracts and purchased
additional interest rate protection contracts aggregating $359.0 million to cap
the variable interest rate index at 7.00% during the first two years. The First
Mortgage Loan and the Expansion Loan can be prepaid only after year two by the
use of certain debt defeasance and yield maintenance provisions. Subsequent to
the seventh year of the loan term, the loan agreements require a substantial
increase in the interest rate and substantially all cash flow from the
properties will be required to pay debt service.
The Repo Financing is a recourse loan to the Company and (i) is primarily
collateralized by cash flow of Prime Retail, L.P., (ii) bears a variable
interest rate of 30-day LIBOR plus 1.95%, (iii) matures in three years, and (iv)
requires monthly interest-only payments during the first year of its term and
monthly interest payments and quarterly principal payments thereafter.
The proceeds from the First Mortgage Loan, the Repo Financing and the
Unsecured Loan were used (i) to repay $253.0 million of debt outstanding under
various credit facilities and loan amounts, (ii) to purchase Rocky Mountain
Factory Stores and Kansas City Factory Outlets, (iii) to purchase the first
mortgage and the 50.0% partnership interest of its joint venture partner in
Grove City Factory Shops, and (iv) for loan fees, escrow deposits, interest rate
protection contracts and transaction costs of approximately $12.7 million. The
remaining proceeds of $7.8 million will be used for working capital purposes.
Subject to certain funding conditions, proceeds from the Expansion Loan will be
used to fund completed and occupied expansions on the sixteen factory outlet
centers pledged as collateral for the First Mortgage Loan.
The Unsecured Loan (i) bears a variable interest rate of 30-day LIBOR plus
3.50%, (ii) requires monthly interest-only payments, (iii) requires mandatory
principal payments of $6.0 million on the earlier of September 11, 1997 or upon
repayment from fundings under the Expansion Loan, and (iv) matures on November
11, 1997.
Michael W. Reschke, chairman of the board of the Company, stated: "As part
of this major refinancing transaction, we have reduced the risk of a significant
increase in interest rates during the next two years and eliminated the risk in
the remaining five years on $359.0 million of debt. As of November 1, 1996,
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PRIME RETAIL CLOSES THREE TRANSACTIONS Page 3
83.5% of our total debt bears a fixed rate of interest or is protected against
significant rate increases through interest rate protection contracts. The
Nomura debt transaction, coupled with the recent completion of our secondary
stock offering and the preferred stock exchange offer, completes the
restructuring of the debt and equity side of our balance sheet by providing us
with a strong platform for future growth."
PURCHASE OF ROCKY MOUNTAIN FACTORY STORES AND KANSAS CITY FACTORY OUTLETS
On November 1, 1996, the Company acquired the Rocky Mountain Factory Stores
and the Kansas City Factory Outlets for an aggregate purchase price of $71.3
million. These centers were purchased by the Company from companies controlled
by JMJ Properties, Inc., based in Muskegon, Michigan. The Company financed the
purchase with the proceeds from the Nomura mortgage loan transactions and the
issuance to the seller of a $12.0 million non-recourse promissory note. The
promissory note bears interest at a fixed rate of 8.25% and requires quarterly
interest payments in arrears. Commencing November 30, 1997 through November 30,
1998, the note will be repaid with four quarterly principal payments each in the
amount of $3.0 million.
Rocky Mountain Factory Stores is located in Loveland, Colorado, which is
approximately 35 miles north of Denver, Colorado and 40 miles south of Cheyenne,
Wyoming. Rocky Mountain Factory Stores contains approximately 328,000 square
feet of gross leaseable area ("GLA") and was 100.0% occupied at September 30,
1996. Lead merchants at Rocky Mountain Factory Stores include Tommy Hilfiger
Company Store, Jones New York Executive Suite, Spiegel Outlet Store, Liz
Claiborne and Reebok Factory Direct Store. Rocky Mountain Factory Stores was
constructed in four phases with the first phase opening in May 1994. In November
1992, Prime Retail opened Castle Rock Factory Shops located in Castle Rock,
Colorado which is approximately 25 miles south of Denver and approximately 75
miles south of Rocky Mountain Factory Stores. Castle Rock Factory Shops contains
370,000 square feet of GLA and was 100.0% occupied at September 30, 1996. As a
result of the Rocky Mountain Factory Stores purchase, Prime Retail now owns
700,000 square feet of outlet space in the Denver market, excluding a 100,000
square foot expansion now under construction at Castle Rock Factory Shops.
Kansas City Factory Outlets is located in Odessa, Missouri which is
approximately 20 miles east of Kansas City on Interstate 70. Phase I of Kansas
City Factory Outlets contains approximately 191,000 square feet of GLA and was
99.0% occupied at September 30, 1996. Lead merchants include Spiegel Outlet
Store, Jones New York Factory Store, Reebok Factory Direct Store, and Eddie
Bauer Outlet Store. Kansas City Factory Outlets opened in July 1995. Phase II,
which contains approximately 105,000 square feet of GLA, is scheduled to open on
November 8, 1996.
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Abraham Rosenthal, chief executive officer of the Company, stated: "Rocky
Mountain Factory Stores and Kansas City Factory Outlets are excellent additions
to our portfolio of factory outlet centers. Both centers have a good tenant mix
and we believe that our leasing, marketing, and operations teams will enhance
the shopping experience at these centers. We expect that these acquisitions will
have a positive effect on our FFO results."
PURCHASE OF FIRST MORTGAGE AND JOINT VENTURE PARTNER'S
PARTNERSHIP INTEREST IN GROVE CITY FACTORY SHOPS
On November 1, 1996, the Company finalized its previously reported
agreement with Fru-Con Projects, Inc. ("Fru-Con") to purchase Fru-Con's first
mortgage and 50.0% partnership interest in Grove City Factory Shops. Grove City
Factory Shops is located in Grove City, Pennsylvania, 40 miles north of
Pittsburgh and 90 miles east of Cleveland. Phase I of the project opened in
August 1994 and consisted of approximately 235,000 square feet of GLA. Phase II
and Phase III of the project consisting of approximately 95,000 and 85,000
square feet of GLA, respectively, opened in November 1994 and November 1995,
respectively. Phase IV of the project containing approximately 118,000 square
feet of GLA is currently under construction and is expected to open to the
public on November 15, 1996. Upon opening of Phase IV, Grove City Factory Shops
will contain approximately 533,000 square feet of GLA. Featuring more than 125
outlet shops, Grove City Factory Shops is one of the Company's largest and most
successful factory outlet centers. Lead merchants include Polo/Ralph Lauren
Factory Store, Tommy Hilfiger Company Store, Nike Factory Store, Brooks Brothers
Factory Store, Coach Factory Store, Jones New York Executive Suite, AnnTaylor
Factory Store and OFF 5TH - Saks Fifth Avenue Outlet.
The terms of the purchase agreement provided for the Company to purchase
Fru-Con's first mortgage and 50.0% interest for $56.0 million. Effective
November 1, 1996, the Company will now own 100.0% of the project. The Company
financed the transaction primarily with the proceeds from the Nomura loan
transactions.
William H. Carpenter, Jr., president and chief operating officer of the
Company, stated: "Grove City Factory Shops is one of the premier factory outlet
centers in the nation with annual sales exceeding $300.00 per square foot. Our
purchase of Fru-Con's interest in Grove City represents an excellent opportunity
to gain 100.0% ownership and control over one of the best outlet centers in the
country. With the attractive terms provided by Nomura, this purchase transaction
also will be accretive to our earnings."
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Prime Retail is a self-administered, self-managed real estate investment
trust engaged in the ownership, development, construction, acquisition, leasing,
marketing and management of factory outlet centers. Prime Retail's outlet center
portfolio consists of 19 outlet centers in 15 states, which total approximately
5.1 million square feet of GLA as of November 1, 1996. The Company expects to
open approximately 810,000 square feet of GLA during 1996 (through November 1,
1996, the Company opened 226,000 square feet of GLA), bringing its portfolio to
almost 5.7 million square feet of outlet space. Prime Retail has been a
developer of factory outlet centers since 1988 and is the second largest owner
of factory outlet space in the U.S.
