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Prime Retail CEO says expansion still on at outlets

January 20, 2000|By JULIE E. GREENE

Prime Retail Inc.'s announcement earlier this week that it won't pay scheduled dividends to preferred stockholders next month won't affect the expansion of the local outlet center, the firm's chief executive officer said Thursday.

Prime Outlets at Hagerstown has been an "extraordinary success," CEO Abraham Rosenthal said during a conference call Thursday with the media and stockholders.

The outlets off Sharpsburg Pike have produced $350 per square foot in sales while some of Prime Retail's other facilities are producing less than $200 per square foot in sales, officials with the Baltimore-based firm said.

A construction loan is in place to finance the third phase of the Hagerstown outlets - 163,000 square feet that is expected to open in mid-April, Rosenthal said. That phase will have room for 25 new stores and a separate 65,000-square-foot building for The Home Co., a Dallas-based furniture store chain owned by Prime Retail.

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On Tuesday morning Prime Retail announced it would suspend the regular quarterly distribution on its common stock and regular quarterly distributions on its preferred stock, scheduled to be paid in February.

The board of directors' decision to suspend the dividend was difficult, but necessary because of liquidity requirements, said Board Chairman Michael W. Reschke.

Prime Retail officials said the company was taking proactive steps because occupancy rates at its lower-end outlet centers were expected to drop this year.

Rosenthal said those occupancy rates was expected to drop to approximately 90 percent this year, but company officials think it could rebound to the mid-90s in the next 12 to 15 months.

Part of the decline is due to seasonal tenants, he said.

Company officials learned about the expected decline in the occupancy rate when they began preparing projections for this year and took into account the financial outlook of its tenants.

To reverse the anticipated decline Prime Retail will invest in improving the look of its lower-end centers, Rosenthal said.

Another option being considered is selling the company, although company officials wouldn't say Thursday whether they had been approached with an offer.

The company is a real estate investment trust that owns and operates 51 outlet centers in 26 states.

To raise capital, Prime Outlets at Hagerstown is set to be sold later this year along with two other outlet centers to a joint venture between Prime Retail and an associate of Estein & Associates USA.

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