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Company official says Prime Retail could default on loan

May 20, 2002|BY JULIE E. GREENE

julieg@herald-mail.com

Prime Retail officials announced this week the company could default on its mezzanine loan, but that wouldn't affect Prime Outlets at Hagerstown, a company official said Friday.

"Hagerstown's a great performing property for us," said Bob Brvenik, chief financial officer for Baltimore-based Prime Retail.

"It's in no danger of being sold or closed or anything like that," Brvenik said. "That asset generates great cash flow for us."

Prime Outlets at Hagerstown is protected from a possible loan default because Prime Retail sold a 70 percent stake in the outlet center to a Florida real estate investment firm in January, Brvenik said.

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Even so, Prime Retail is trying to make its next payment on the mezzanine loan on time or get an extension, Brvenik said.

Prime Retail needs to pay Fortress Investment Fund $14.7 million by July 1. That deadline could be extended to Oct. 31 if Prime Retail meets certain conditions, Brvenik said.

The outstanding principal balance on the three-year mezzanine loan is $36.7 million. The original $90 million mezzanine loan was secured in December 2000.

If Prime Retail defaulted on the loan, officials would try to change the loan terms so the company remains in compliance, Brvenik said.

The worst-case scenario is Fortress could sell some of Prime Retail's outlet centers or take Prime Retail's income from the leases to cover the debt, Brvenik said.

Prime Retail's funds from operation - a key performance measure - was $7 million for the first quarter this year, compared with $7.3 million during the same period the previous year.

Same-store sales at Prime Retail's outlet centers decreased by 1.3 percent for the first quarter this year compared to the same period in 2001.

Prime Outlets at Hagerstown performed better than that, said Marketing Director Liza Gonzales. Specific numbers were not available Friday.

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