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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) January 30, 1997
----------------
Prime Retail, Inc.
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(Exact name of registrant as specified in its charter)
Maryland 0-23616 52-1836258
- ---------------------------------- ------------------- --------------------
(State of other jurisdiction of (Commission File (IRS Employer
incorporation) Number) Identification No.)
100 East Pratt Street
Nineteenth Floor, Baltimore, Maryland 21202
- ---------------------------------------- --------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (410) 234-0782
--------------------
No Change
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(Former name or former address, if changed since last report)
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<PAGE>
PRIME RETAIL, INC.
ITEM 5: Other Events
Reference is made to the Press Release dated January 30, 1997 attached
hereto as Exhibit 10.1 and incorporated by reference herein.
ITEM 7: Financial Statements and Exhibits
A. Financial Statements: None
B. Exhibits:
Description Exhibit
----------- -------
Press Release dated January 30, 1997 10.1
announcing its operating results for
the fourth quarter and year ended
December 31, 1996.
2
<PAGE>
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: January 30, 1997
By: /s/ Robert P. Mulreaney
-------------------------
Name: Robert P. Mulreaney
Title: Executive Vice President,
Chief Financial Officer
and Treasurer
3
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
-------
Press Release dated January 30, 1997 announcing 10.1
its operating results for the fourth quarter and
year ended December 31, 1996.
4
FOR IMMEDIATE RELEASE FOR MORE INFORMATION
JANUARY 30, 1997 CONTACT: ROBERT P. MULREANEY
CHIEF FINANCIAL OFFICER
ANYA T. HARRIS
PUBLIC RELATIONS
(410) 234-0782
PRIME RETAIL, INC. REPORTS REVISED FULL YEAR GAAP EARNINGS
BALTIMORE -- Prime Retail, Inc. (NASDAQ: PRME, PRMEP) today announced
revised GAAP earnings for the year ended December 31, 1996. Such GAAP earnings
are revised from those reported by the Company on January 28, 1997. This
revision had no effect on previously reported fourth quarter and full year
funds from operations information. The revised earnings result from a
reallocation of the second quarter 1996 extraordinary loss between minority
interests and common shareholders. The effect of the reallocation is to reduce
the net loss applicable to common shareholders for the year ended December 31,
1996 to $(6,175) or $(0.75) per common share from the previously announced
$(9,437) or $(1.15) per common share.
The following presents the Company's January 28, 1997 release with revised
earnings information.
--MORE--
<PAGE>
FOR IMMEDIATE RELEASE FOR MORE INFORMATION
JANUARY 30, 1997 CONTACT: ROBERT P. MULREANEY
CHIEF FINANCIAL OFFICER
ANYA T. HARRIS
PUBLIC RELATIONS
(410) 234-0782
PRIME RETAIL, INC. REPORTS 29.3% INCREASE IN FOURTH QUARTER
FUNDS FROM OPERATIONS
BALTIMORE -- Prime Retail, Inc. (NASDAQ: PRME, PRMEP) today announced its
operating results for the fourth quarter and year ended December 31, 1996.
In accordance with the new definition of funds from operations ("FFO")
established by the National Association of Real Estate Investment Trusts in
1995, FFO before allocations to preferred shareholders and minority interests
increased 29.3% to $9.7 million for the three months ended December 31, 1996,
compared to $7.5 million for the three months ended December 31, 1995. On a
primary basis, FFO per common share equivalent increased 66.7% to $0.30 for the
three months ended December 31, 1996, compared to $0.18 for the three months
ended December 31, 1995. On a fully diluted basis, FFO per common share
equivalent increased 10.3% to $0.32 the three months ended December 31, 1996,
compared to $0.29 for the three months ended December 31, 1995.
Abraham Rosenthal, chief executive officer of the Company, stated: "We are
very pleased with the 29.3% increase in FFO in the fourth quarter of 1996 when
compared to the same period in 1995. Our fourth quarter results include the
financial benefits associated with the recently completed acquisitions of Rocky
Mountain Factory Stores, Kansas City Factory Outlets and our joint venture
partner's 50.0% interest in Grove City Factory Shops and the openings of Buckeye
Factory Shops and Carolina Factory Shops. 1996 was a very productive year for
the Company, considering we completed a $43.2 million common stock secondary
offering, exchanged 60% of our Series B preferred stock for common stock,
completed a significant debt refinancing, opened 930,000 square feet of new
outlet space and completed several strategic property acquisitions. The
fundamentals of our business are sound and, therefore, we look forward to
continued growth in future years."
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<PAGE>
PRIME RETAIL REPORTS FOURTH QUARTER RESULTS PAGE 2
FFO before allocations to preferred shareholders and minority interests was
$27.6 million for the year ended December 31, 1996, after deducting
non-recurring charges of $6.1 million in the second quarter related to the debt
refinancing, compared to $28.0 million for the year ended December 31, 1995. On
a primary basis, FFO per common share equivalent increased 37.5% to $0.77 for
the year ended December 31, 1996, compared to $0.56 for the year ended December
31, 1995. On a fully diluted basis, FFO per common share equivalent decreased
12.3% to $0.93 for the year ended December 31, 1996, compared to $1.06 for the
year ended December 31, 1995. The non-recurring charge of $6.1 million related
primarily to the write down of nonrefundable deferred financing fees and the
unamortized cost of certain interest rate protection contracts. The
non-recurring charge had no effect on distributable net cash flow of the
Company.
Income before allocations to preferred shareholders, minority interests and
extraordinary loss (GAAP basis) was $7.0 million and $12.8 million for the years
ended December 31, 1996 and 1995, respectively, and $3.7 million and $3.4
million for the three months ended December 31, 1996 and 1995, respectively.
As previously announced, on November 1, 1996, the Company acquired Rocky
Mountain Factory Stores and Kansas City Factory Outlets for an aggregate
purchase price of $71.3 million. Rocky Mountain Factory Stores is located in
Loveland, Colorado, which is approximately 35 miles north of Denver and contains
approximately 328,000 square feet of GLA. Kansas City Factory Outlets is located
in Odessa, Missouri, which is approximately 20 miles east of Kansas City and
contains approximately 191,000 square feet of GLA. On November 8, 1996, the
Company opened Phase II of Kansas City Factory Shops, which contains
approximately 105,000 square feet of GLA. On November 1, 1996, the Company also
finalized its previously announced agreement to purchase its joint venture
partner's first mortgage and 50.0% partnership interest in Grove City Factory
Shops. Grove City Factory Shops is located in Grove City, Pennsylvania, which is
approximately 40 miles north of Pittsburgh and consists of approximately 415,000
square feet of GLA. On November 15, 1996, the Company opened Phase IV of Grove
City Factory Shops containing approximately 118,000 square feet of GLA bringing
the total project to 533,000 square feet of GLA. Grove City Factory Shops is the
number one project in the Company's portfolio in terms of total GLA and sales
per square foot which exceed $340.00 for the year ended December 31, 1996. The
operating results of the Company for the three months ended December 31, 1996
include the results of these three acquisitions which closed on November 1,
1996. Prior to November 1, 1996, the Company accounted for its 50.0% investment
in Grove City Factory Shops using the equity method of accounting. As a result
of the Company's acquisition of its joint venture partner's 50.0% interest, the
operating results of Grove City Factory Shops are now consolidated. Finally, on
November 1, 1996, the Company completed a previously announced debt refinancing
that provided $428.3 million of loan proceeds. Proceeds from this transaction
were primarily used (i) to refinance debt under various credit facilities, (ii)
to purchase Rocky Mountain Factory Stores, Kansas City Factory Outlets and Grove
City Factory Shops, and (iii) loan costs, fees and working capital.
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<PAGE>
PRIME RETAIL REPORTS FOURTH QUARTER RESULTS PAGE 3
During the year ended December 31, 1996, the Company opened 930,000 square
feet of GLA as summarized in the following table:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CENTER GLA OPENING DATE LOCATION
- ------------------------------------- ------------ ------------------------- ------------------------------
THIRD QUARTER OPENINGS
Arizona Factory Shops 109,000 September 26 Phoenix, Arizona
Ohio Factory Shops 35,000 August 29 Jeffersonville, Ohio
Magnolia Bluff Factory Shops 21,000 July 28 Darien, Georgia
Triangle Factory Shops 6,000 July 19 Raleigh-Durham, North Carolina
-------
Total third quarter 171,000
FOURTH QUARTER OPENINGS
Carolina Factory Shops 235,000 November 8 Gaffney, South Carolina
Buckeye Factory Shops 205,000 November 22 Medina County, Ohio
Grove City Factory Shops 118,000 November 15 Grove City, Pennsylvania
Kansas City Factory Outlets 105,000 November 8 Odessa, Missouri
Gulfport Factory Shops 40,000 November 1 Gulfport, Mississippi
Gulf Coast Factory Shops 30,000 October 18 Ellenton, Florida
Indiana Factory Shops 26,000 November 14 Daleville, Indiana
-------
Total fourth quarter 759,000
TOTAL - 1996 930,000
=============================================================================================================================
</TABLE>
For the year ended December 31, 1996, same-space sales in centers owned by
the Company increased 0.4% to $233.00 per square foot compared to $232.00 per
square foot for the year ended December 31, 1995. Same-space sales is defined as
weighted average sales per square foot reported by merchants for space open
since January 1, 1995.
On January 16, 1997, the board of directors approved a dividend of $0.295
per common share payable on February 15, 1997 to common shareholders of record
on February 3, 1997. The dividend covers the period from October 1, 1996 through
December 31, 1996. The dividend is the pro rata equivalent of an annual dividend
of $1.18 per share. In addition, the board approved a dividend of $0.53125 per
share on the 8.5% Series B Preferred Stock. This dividend is payable on February
15, 1997 to Series B Preferred shareholders of record on February 3, 1997. The
dividend covers the period from November 16, 1996 through February 15, 1997. The
dividend is the pro rata equivalent of an annual dividend of $2.125 per share.
The board further approved a dividend of $0.65625 per share on the 10.5% Series
A Senior Cumulative Preferred Stock. This dividend is payable on February 15,
1997 to Series A Preferred shareholders of record on February 3, 1997. The
dividend covers the period from November 16, 1996 through February 15, 1997. The
dividend is the pro rata equivalent of an annual dividend of $2.625 per share.
Based on the old definition of funds from operations ("old FFO"), old FFO
before allocations to preferred shareholders and minority interests increased
17.6% to $10.5 million for the three months ended December 31, 1996, compared to
$8.9 million for the three months ended December 31, 1995. On a primary basis,
old FFO per common share equivalent increased 13.3% to $0.34 for the three
months ended December 31, 1996, compared to $0.30 for the three months ended
December 31, 1995. On a fully diluted basis, old FFO per common share equivalent
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<PAGE>
PRIME RETAIL REPORTS FOURTH QUARTER RESULTS PAGE 4
decreased 2.8% to $0.35 for the three months ended December 31, 1996, compared
to $0.36 for the three months ended December 31, 1995. The fourth quarter 1996
old FFO results represent the second consecutive quarter that parity was
achieved in the amount of dividends and distributions that will be paid to
both common shareholders and unit holders at $0.295 per share.
For the year ended December 31, 1996, the dividends and distributions paid
to shareholders are taxable as summarized in the following table:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SECURITY RETURN OF CAPITAL ORDINARY INCOME
- ---------------------------------------------- ------------------------------- -------------------------------------
Common Stock 100.0% -
10.5% Series A Cumulative Preferred
Stock - 100.0%
8.5% Series B Cumulative Participating
Convertible Preferred Stock
61.98% 38.02%
=================================================================================================================================
</TABLE>
Prime Retail is a self-administered, self-managed real estate investment
trust engaged in the ownership, development, and management of factory outlet
centers. Prime Retail's outlet center portfolio consists of 21 outlet centers in
16 states, which total approximately 5.8 million square feet of GLA as of
December 31, 1996. As of December 31, 1996, Prime Retail's factory outlet center
portfolio was approximately 91% leased. Prime Retail has been a developer of
factory outlet centers since 1988. For additional information, visit Prime
Retail's web site at: http://www.primeretail.com.
--TABLES FOLLOW--
<PAGE>
<TABLE>
<CAPTION>
PRIME RETAIL, INC. PAGE 5
SELECTED FINANCIAL DATA (UNAUDITED)
Amounts in thousands except per share and unit information
GAAP BASIS
Three Months Ended Year Ended
December 31 December 31
----------------------------------- ---------------------------------
1996 1995 1996 1995
---------------- ------------------ ---------------- ----------------
STATEMENTS OF OPERATIONS
<S> <C> <C> <C> <C>
REVENUES
Base rents $ 16,293 $ 12,659 $ 54,710 $ 46,368
Percentage rents 710 399 1,987 1,520
Tenant reimbursements 7,181 6,151 25,254 22,283
Income from investment partnerships 380 537 1,239 1,729
Interest and other 1,364 1,583 5,850 5,498
--------- -------- -------- --------
TOTAL REVENUES 25,928 21,329 89,040 77,398
EXPENSES
Property operating 5,885 4,962 20,421 17,389
Real estate taxes 1,434 911 5,288 4,977
Depreciation and amortization 5,678 4,177 19,256 15,438
Corporate general and administrative 1,186 1,438 4,018 3,878
Interest 7,142 5,842 24,485 20,821
Other charges 899 630 8,586 2,089
--------- -------- -------- --------
TOTAL EXPENSES 22,224 17,960 82,054 64,592
--------- -------- -------- --------
INCOME BEFORE MINORITY INTERESTS AND
EXTRAORDINARY ITEM 3,704 3,369 6,986 12,806
(Income) loss allocated to minority interests (2,568) 1,213 2,092 5,364
--------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM 1,136 4,582 9,078 18,170
Extraordinary item - loss on early
extinguishment of debt, net of minority
interests in the amount of $3,263 - - (1,017) -
--------- -------- -------- --------
NET INCOME 1,136 4,582 8,061 18,170
Income allocated to preferred shareholders 3,000 5,236 14,236 20,944
--------- -------- -------- --------
LOSS ALLOCATED TO COMMON SHAREHOLDERS $ (1,864) $ (654) $ (6,175) $ (2,774)
========== ======== ======== ========
PER COMMON SHARE (1):
Loss before extraordinary item $ (0.14) $ (0.23) $ (0.63) $ (0.96)
Extraordinary item - - (0.12) -
--------- -------- -------- --------
Net loss $ (0.14) $ (0.23) $ (0.75) $ (0.96)
========= ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 13,405 2,875 8,221 2,875
========= ======== ======== ========
SELECTED BALANCE SHEET DATA
December 31
-----------------------------------
1996 1995
---------------- ------------------
Rental properties before accumulated depreciation $643,873 $454,480
Cash and cash equivalents 3,924 14,927
Total assets 666,803 462,405
Mortgage and other debt 499,523 305,954
Total liabilities 527,596 326,465
Shareholders' equity 139,207 121,484
</TABLE>
--TABLES CONTINUE--
<PAGE>
<TABLE>
<CAPTION>
PRIME RETAIL, INC. PAGE 6
SELECTED FINANCIAL DATA (UNAUDITED) -- CONTINUED
Amounts in thousands except per share and unit information
FUNDS FROM OPERATIONS (FFO) AND DIVIDEND DISTRIBUTION SUMMARY
Three Months Ended Year Ended
December 31 December 31
----------------------------------- ---------------------------------
1996 1995 1996 1995
---------------- ------------------ --------------- -----------------
RECONCILIATION OF GAAP INCOME
TO FFO (NEW AND OLD DEFINITION)
<S> <C> <C> <C> <C>
Income before minority interests
and extraordinary item (GAAP basis) $ 3,704 $ 3,369 $ 6,986 $ 12,806
Adjustments:
Depreciation and amortization 5,678 4,177 19,256 15,438
Amortization of deferred financing costs and
interest rate protection contracts 696 1,213 3,723 4,524
Non-cash charges - 6,131 -
-
Unconsolidated joint venture adjustments 388 144 2,052 365
--------- -------- -------- --------
Distributable net cash flow(2) 10,466 8,903 38,148 33,133
Non-cash charges - - (6,131) -
--------- -------- -------- --------
FFO - Old Definition(3) 10,466 8,903 32,017 33,133
Non-real estate depreciation
and amortization (773) (1,407) (4,380) (5,137)
--------- -------- -------- --------
FFO - New Definition(3) $ 9,693 $ 7,496 $ 27,637 $ 27,996
========= ======== ======== ========
DIVIDEND DISTRIBUTION SUMMARY
Distributable net cash flow $ 10,466 $ 8,903 $ 38,148 $ 33,133
Preferred stock dividend - Series A (1,509) (1,509) (6,038) (6,038)
--------- -------- -------- --------
8,957 7,394 32,110 27,095
Payout reserves (4) (1,003) (739) (3,347) (2,710)
--------- -------- -------- --------
7,954 6,655 28,763 24,385
Preferred stock dividend - Series B (1,491) (3,727) (8,199) (14,907)
--------- -------- -------- --------
6,463 2,928 20,564 9,478
Common stock dividend (3,954) (848) (12,711) (3,392)
--------- -------- -------- --------
2,509 2,080 7,853 6,086
Distribution adjustment(5) - - 1,117 -
--------- -------- -------- --------
Total distribution to limited partners $ 2,509 $ 2,080 $ 8,970 $ 6,086
========= ======== ======== ========
Per share/unit amounts:
Preferred stock
Series A $ 0.656 $ 0.656 $ 2.625 $ 2.625
========= ======== ======== ========
Series B $ 0.531 $ 0.531 $ 2.125 $ 2.125
========= ======== ======== ========
Common stock(6) $ 0.295 $ 0.295 $ 1.180 $ 1.180
========= ======== ======== ========
Limited partner units(6) $ 0.295 $ 0.226 $ 1.036 $ 0.660
========= ======== ======== ========
</TABLE>
--TABLES CONTINUE--
<PAGE>
<TABLE>
<CAPTION>
PRIME RETAIL, INC. PAGE 7
SELECTED FINANCIAL DATA (UNAUDITED) -- CONTINUED
Amounts in thousands except per share and unit information
FUNDS FROM OPERATIONS (FFO) AND DIVIDEND DISTRIBUTION SUMMARY--(CONTINUED)
FUNDS FROM OPERATIONS SUMMARY - NEW DEFINITION
Three Months Ended Year Ended
December 31 December 31
----------------------------------- ---------------------------------
1996 1995 1996 1995
---------------- ------------------ --------------- -----------------
<S> <C> <C> <C> <C>
FFO - New Definition $ 9,693 $ 7,496 $ 27,637 $ 27,996
Minority interests (60) (45) (248) (276)
--------- -------- -------- --------
9,633 7,451 27,389 27,720
Preferred stock dividends
Series A (1,509) (1,509) (6,038) (6,038)
Series B (1,491) (3,727) (8,199) (14,907)
--------- -------- -------- --------
6,633 2,215 13,152 6,775
Allocation to limited partners (2,509) (2,080) (7,853) (6,086)
--------- -------- -------- --------
Allocation to common shares outstanding $ 4,124 $ 135 $ 5,299 $ 689
========= ======== ======== ========
FFO per common share outstanding(6)(7) $ 0.31 $ 0.05 $ 0.64 $ 0.24
========= ======== ======== ========
FFO per common share equivalent - primary(6)(8) $ 0.30 $ 0.18 $ 0.77 $ 0.56
========= ======== ======== ========
FFO per common share equivalent - fully diluted(6)(9) $ 0.32 $ 0.29 $ 0.93 $ 1.06
========= ======== ======== ========
Weighted Average Shares and Units Outstanding
Common Shares 13,405 2,875 8,221 2,875
Limited partner common units 8,505 9,221 8,855 9,221
--------- -------- -------- --------
Total primary shares 21,910 12,096 17,076 12,096
Series B convertible preferred shares 3,356 8,391 5,805 8,391
--------- -------- -------- --------
Total fully diluted shares 25,266 20,487 22,881 20,487
========= ======== ======== ========
</TABLE>
--TABLES CONTINUE--
<PAGE>
<TABLE>
<CAPTION>
PRIME RETAIL, INC. PAGE 8
SELECTED FINANCIAL DATA (UNAUDITED) -- CONTINUED
Amounts in thousands except per share and unit information
FUNDS FROM OPERATIONS (FFO) AND DIVIDEND DISTRIBUTION SUMMARY--(CONTINUED)
FUNDS FROM OPERATIONS SUMMARY - OLD DEFINITION
Three Months Ended Year Ended
December 31 December 31
----------------------------------- ---------------------------------
1996 1995 1996 1995
---------------- ------------------ --------------- -----------------
<S> <C> <C> <C> <C>
FFO - Old Definition $ 10,466 $ 8,903 $ 32,017 $ 33,133
Minority interests (62) (70) (253) (280)
--------- -------- -------- --------
10,404 8,833 31,764 32,853
Preferred stock dividends
Series A (1,509) (1,509) (6,038) (6,038)
Series B (1,491) (3,727) (8,199) (14,907)
--------- -------- -------- --------
7,404 3,597 17,527 11,908
Allocation to limited partners (2,509) (2,080) (7,853) (6,086)
--------- -------- -------- --------
Allocation to common shares outstanding $ 4,895 $ 1,517 $ 9,674 $ 5,822
========= ======== ======== ========
FFO per common share outstanding(6)(7) $ 0.37 $ 0.53 $ 1.18 $ 2.03
========= ======== ======== ========
FFO per common share equivalent - primary(6)(8) $ 0.34 $ 0.30 $ 1.03 $ 0.98
========= ======== ======== ========
FFO per common share equivalent - fully diluted(6)(9) $ 0.35 $ 0.36 $ 1.12 $ 1.31
========= ======== ======== ========
Weighted Average Shares and Units Outstanding
Common Shares 13,405 2,875 8,221 2,875
Limited partner common units 8,505 9,221 8,855 9,221
--------- -------- -------- --------
Total primary shares 21,910 12,096 17,076 12,096
Series B convertible preferred shares 3,356 8,391 5,805 8,391
--------- -------- -------- --------
Total fully diluted shares 25,266 20,487 22,881 20,487
========= ======== ======== ========
</TABLE>
--TABLES CONTINUE--
<PAGE>
PRIME RETAIL, INC. PAGE 9
SELECTED FINANCIAL DATA (UNAUDITED) -- CONTINUED
Amounts in thousands except per share and unit information
FUNDS FROM OPERATIONS (FFO) AND DIVIDEND DISTRIBUTION SUMMARY --CONTINUED
Notes:
(1) Net loss per common share (GAAP basis) is net of applicable preferred
dividends. Fully diluted per share amounts (GAAP basis) are not presented
since the effect would be anti-dilutive.
(2) In accordance with its Partnership Agreement, Prime Retail, L.P. excludes
non-cash charges in determining its distributable net cash flow.
(3) Funds from operations means net income (loss) (computed in accordance with
GAAP), excluding gains or losses from debt restructuring and sales of real
property, plus depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures. In March 1995, the National
Association of Real Estate Investment Trusts established guidelines
clarifying the definition of FFO (as modified, the "New Definition"). For
the Company, the primary impact of reporting FFO under the New Definition
is a reduction in FFO since the amortization of capitalized debt costs and
depreciation of non-real estate assets are not added back to income before
allocations to minority interests (GAAP basis).
(4) Includes reserves for capital expenditures and working capital.
(5) In accordance with the Partnership Agreement, dividends paid on newly
issued shares of common stock are not subtracted in connection with
calculating the amount to be distributed to the limited partners to the
extent such newly issued shares were not issued and outstanding for the
entire quarter.
(6) In accordance with its Partnership Agreement, Prime Retail, L.P. will pay a
preferential distribution of $0.295 in each quarter for each common unit
held by Prime Retail, Inc. (the total of such units is equal to the number
of outstanding common shares of the Company) before any distribution is
paid for the common units held by the Limited Partners. After payment of
the preferential distribution to Prime Retail, Inc., up to $0.295 will be
distributed for each common unit held by the Limited Partners. Any
additional distributions will be allocated pro rata among the common units
held by the Company and by the Limited Partners. The preferential
distribution for common units held by the Company will terminate after
Prime Retail, L.P. has paid quarterly distributions of at least $0.295 on
all common units (21,910 common units after giving effect to the exchange
offer and the secondary common stock offering) during four successive
quarters without distributing to the Convertible Preferred Units and common
units more than 90% of FFO after the payment of distributions to the Senior
Preferred Units in any such quarter. Once the preferential distribution is
terminated, distributions with respect to the common units held by Prime
Retail, Inc. and the Limited Partners will be pro rata to the holders
thereof. Accordingly, FFO must equal at least $10,347 (or $0.335 per common
share equivalent-primary) for four successive quarters to terminate the
preferential distribution to the Company. For purposes of determining the
amount of distributions to the Limited Partners and whether the Company's
FFO is sufficient to terminate the preferential distribution, FFO is
calculated based on the old definition of Funds from Operations.
(7) "FFO per common share outstanding" is equal to FFO after minority interests
less Series A and Series B preferred dividends and distributions to limited
partners divided by the weighted average number of common shares
outstanding.
(8) "FFO per common share and common share equivalent-primary" is equal to FFO
after minority interests less Series A and Series B preferred dividends
divided by the total of (a) the weighted average number of common shares
and (b) the weighted average number of limited partner common units.
(9) "FFO per common share and common share equivalent-fully diluted" is equal
to FFO after minority interests less Series A preferred dividends divided
by the total of (a) the weighted average number of common shares, (b) the
weighted average number of limited partner common units and (c) the
weighted average number of common share equivalents assuming a full
conversion of all Series B convertible preferred shares.
# # #
