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Prime Retail store closing

April 05, 2000|By KERRY LYNN FRALEY

The Designer Connection clothing stores at Prime Outlets at Hagerstown and several other Prime Retail outlet centers will close within the next four months as part of Baltimore-based Prime Retail's strategy to stabilize its financial situation, a company spokesman said Wednesday.

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Prime Retail opened the Designer Connection retail stores in some of its outlet centers as a way to offer shoppers additional brand-name women's and men's fashions, said spokesman Steven A. Sless.

"Unfortunately, the stores weren't profitable," Sless said.

He said he didn't know how many workers will lose their jobs because of the Hagerstown store's closing but said they are being assisted in finding other jobs.

Prime Retail is doing its best to address some "financial challenges" - including default on provisions of two loans - and doesn't expect them to lead to bankruptcy, Sless said.

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The pending sale of the Hagerstown center and two others to a joint venture between Prime Retail and an affiliate of Estein & Associates USA Ltd. will help stabilize the company's capital structure, Sless said.

The company is also focusing on building traffic at its "underperforming" centers by "rehabilitating them to Prime standards" and subsidizing marketing dollars for the company's entire portfolio, he said.

Prime Retail has 51 outlet centers in 26 states and plans to open a new outlet center this year in Puerto Rico.

A third phase of shops and a separate home furnishings store were recently completed at the Hagerstown outlet center, which opened in August 1998.

Any time a company is in violation of its covenants with lenders, it brings into question the company's ability to continue operating, according to Rob Norfleet, an analyst with Richmond-based Davenport & Co.

Still, it's too early to say if Prime Retail is headed for bankruptcy, Norfleet said.

Basically, Prime Retail overextended itself at a time when capital sources were drying up, he said.

The company has incurred the costs of an aggressive development program, including starting its eOutlets.com subsidiary, and has had performance problems with its lower-end centers, Norfleet said.

"The company is in dire need of liquidity and capital," he said. "It's going to be very difficult for them not to close some centers."

The fact Prime Outlets at Hagerstown is included in the Prime Retail's package sale strengthens its chances of survival, according to Norfleet.

"You've got a stronger financial owner," he said.

The sale, expected to go through by the fourth quarter of this year, will give the Estein & Associates affiliate 70 percent equity ownership of Prime Retail's outlet malls in Hagerstown, Williamsburg, Va., and Birch Run, Mich., Sless said.

The transition will be invisible to shoppers because Prime Retail will continue to manage the centers and their names will stay the same, he said.

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