EXHIBIT 99.1
FOR IMMEDIATE RELEASE FOR MORE INFORMATION CALL:
December 22, 2000 Investors: Robert A. Brvenik
Chief Financial Officer
(410) 234-1750
Media: Steven A. Sless
Director of
Public Relations
(410) 234-8333
PRIME RETAIL CLOSES ON LOANS TOTALING $120 MILLION,
COMPLETES THE SALE OF FOUR OUTLET CENTERS AND
EXTENDS THE TERMS OF TWO OTHER LOANS
TRANSACTIONS WILL RAISE $174 MILLION OF NET PROCEEDS
BALTIMORE - Prime Retail, Inc. (NYSE: PRT, PRT.PRA, PRT.PRB) (the
"Company") announced today that it has closed a major refinancing of its assets
and the sale of four of its outlet centers through a series of transactions that
provided the Company an aggregate of $174 million of net proceeds. The lenders
are an affiliate of Fortress Investment Fund LLC ("Fortress"); Greenwich Capital
Financial Products, Inc. ("Greenwich"); and Mercantile-Safe Deposit and Trust
Company ("Mercantile"). The sale of its outlet centers was to Fortress and
Chelsea GCA Realty, Inc. ("Chelsea").
Fortress and Greenwich (the "Lending Group") provided a mezzanine loan
in the amount of $90 million. Greenwich provided a $20 million first mortgage
loan on the Company's outlet center which recently opened in Puerto Rico and
Mercantile provided a $10 million second mortgage loan on the Company's outlet
center in Hagerstown, Maryland. The Company also extended the maturities of two
existing loans, the $112 million first mortgage loan from Nomura Asset Capital
Corporation ("Nomura") and the $20 million first mortgage loan from KeyBank
National Association ("KeyBank").
The sale to Fortress and Chelsea of four of the Company's outlet
centers was for a total consideration of $240 million, including the assumption
of $174 million of first mortgage debt. The net proceeds from the sale, after
closing costs and fees and the required purchase by the Company of land in the
amount of $7 million related to the outlet center in Gilroy, California, was $54
million. The four outlet centers which were sold are located in Gilroy,
California; Michigan City, Indiana; Waterloo, New York; and Kittery, Maine and
total 1.5 million sq. ft. of gross leasable area.
The $90 million mezzanine loan is secured by pledges of equity
interests in certain outlet centers. The loan is for a term of three years,
requires fixed amortization each month and is pre-payable at any time after one
year, subject to the payment of certain exit fees. The interest rate is a
floating rate based on one-month Libor plus 950 basis points. The loan contains
financial and other covenants that restrict, among other things, the ability of
the Company to incur additional indebtedness or pay dividends (other than
dividends needed to maintain the Company's status as a REIT). In connection with
the financing the Company issued warrants to the Lending Group to purchase one
million shares of the Company's common stock at an exercise price of $1.00 per
share.
The $20 million non-recourse first mortgage loan secured by the
Company's outlet center in Puerto Rico is for a term of three years, requires
monthly amortization based upon a 25-year schedule for the first year and a
15-year schedule thereafter. The loan is pre-payable at any time subject to
certain prepayment and exit fees. The interest rate is floating based on
one-month Libor plus 350 basis points.
The $10 million second mortgage loan secured by the Company's outlet
center in Hagerstown, Maryland is for a term of 30 months co-terminus with
Mercantile's existing $49 million first mortgage loan. The loan requires monthly
amortization starting in the seventh month of $164,000 per month and is
pre-payable at any time without penalty or fee. The interest rate is floating
based on one month Libor plus 250 basis points.
The proceeds from the mezzanine loan, the Puerto Rico mortgage loan,
the Hagerstown mortgage loan and the sale of the four outlet centers were used
to pay off $125 million of short-term debt. The remainder of the proceeds will
be used for general corporate purposes, including the funding of certain
programs to attract and retain tenants through increased marketing and capital
improvements.
The Company also executed agreements to extend the terms of two loans.
The term of the $112 million loan from Nomura, which was to mature on June 11,
2001, was extended until December, 2003. In consideration for the extension, the
interest rate was increased to 13.0%, the monthly amortization was adjusted to
the greater of 50% of excess cash flow or $50,000, and a loan extension fee of
$1.1 million was paid. The loan may be prepaid at any time. The term of the $20
million first mortgage loan on the Company's outlet center in Lebanon, Tennessee
from KeyBank, which was to mature on December 31, 2000, was extended for a
period of six months until June 30, 2001, with an additional three-month
extension available if certain conditions are met. In consideration for the
extension, the interest rate was increased by 125 basis points to one-month
Libor plus 300 basis points and the loan balance was reduced to $19 million by
the payment of $1.0 million toward principal. The loan may be prepaid at any
time.
Commenting on today's announcement, Prime Retail Chairman and CEO Glenn
D. Reschke expressed optimism regarding the future of the Company, "Today's
transactions are the culmination of nearly seven months of effort to complete a
complex refinancing of the Company's debt, including the extension of two
near-term maturities. These transactions mark the critical first step toward
Prime Retail's return to financial stability. "
Reschke added, "These transactions should stabilize the Company's
financial condition, eliminate the threat of bankruptcy, and strengthen the
Company's balance sheet by reducing our overall level of debt and extending
certain loan maturities. This, in turn, provides the Company with the
opportunity to use cash flow from the projects to reduce the new debt over time.
The Company intends to continue to pursue, on a selective basis, the sale of
additional projects to de-lever the Company's balance sheet more quickly.
Finally, these transactions will provide the Company with the capital needed to
increase sales and traffic for our tenants through additional marketing
initiatives and physical improvements and enhancements at our outlet centers."
As previously announced, the Company was in default of the $20 million
subordinated loan made by FBR Asset Investment Corporation ("FBR-AIC") that
matured August 14, 2000. The default under the FBR-AIC loan triggered
cross-default provisions with respect to other Company debt facilities. In
addition, as previously announced, the Company was not in compliance with
financial covenants contained in certain of its debt facilities. With the
repayment of the $20 million loan from FBR-AIC, the $25 million line of credit
from Mercantile, the $37 million loan from The Capital Company of America LLC
and the $43 million loan from Greenwich, along with the execution of various
restructuring and extension agreements, the Company has cured or eliminated all
material defaults under its recourse loan agreements. Three first mortgage loans
related to projects in which the Company owns joint venture interests that have
matured remain in default: a $10 million first mortgage loan on Phase I of the
outlet center in Bellport, New York, held by Union Labor Life Insurance Company;
a $30 million first mortgage loan on the Company's outlet center in New River,
Arizona held by Fru-Con Development Corporation ("Fru-Con"); and a $13 million
first mortgage loan on the outlet center in Oxnard, California, also held by
Fru-Con. Fru-Con is also the Company's 50% partner in both New River and Oxnard.
As of this date only Union Labor Life Insurance Company has filed for
foreclosure. None of the three loans is recourse to the Company. The Company
does not believe the existing defaults under these loans or any related
foreclosures on the mortgaged properties represent a material financial risk to
the Company.
Prime Retail is a self-administered, self-managed real estate
investment trust engaged in the ownership, leasing, marketing and management of
outlet centers throughout the United States and Puerto Rico. After the effect of
the sale of four centers, Prime Retail's outlet center portfolio consists of 48
outlet centers in 25 states and Puerto Rico totaling 13.5 million square feet of
GLA. The Company also owns three community shopping centers totaling 424,000
square feet of GLA and 154,000 square feet of office space. As of November 30,
2000, Prime Retail's outlet center portfolio (excluding the four sold projects)
was 92.7% occupied. Prime Retail has been an owner, operator and a developer of
outlet centers since 1988. For additional information, visit Prime Retail's web
site at www.primeoutlets.com.
Some of the information contained herein which are not statements of
historical facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that reflect management's
current views with respect to future events and financial performance. The words
"believes", "expects", "anticipates", "estimates" and similar words or
expressions are generally intended to identify forward-looking statements.
Actual results may differ materially from those expected because of various
risks and uncertainties, including, but not limited to, changes in general
economic conditions, adverse changes in real estate markets as well as other
risks and uncertainties included from time to time in the Company's filings with
the Securities and Exchange Commission. Prime Retail accepts no responsibility
for updating forward-looking statements.
