Fueled by the success of its recent growth, Prime Retail Inc. yesterday said it plans to develop roughly $100 million worth of new factory outlet centers each year though 1997.
As part of its development program, the Baltimore-based real estate investment trust (REIT) plans to build its first Maryland center in Hagerstown, company executives informed shareholders during its annual meeting.
Prime Retail intends to open the first phase of the 200,000-square-foot project late next year. Thus far, the company has obtained an option to purchase 76 acres at the junction of Interstates 81 and 70, officials said.
In all, the company hopes to add roughly one million square feet annually to its 14-center portfolio, which contains 3.4 million square feet and is valued at almost $400 million. In 1994, Prime added 1.1 million square feet through new construction, expansions and an acquisition.
"1994 was a very productive year for Prime Retail," said Abraham Rosenthal, the company's chief executive. "We opened four new centers, we achieved 96 percent occupancy and consumers have been very receptive to the kind of development we're doing."
As a result, Prime Retail has produced impressive results since completing an initial public offer ing in March 1994 that raised $280 million, according to both REIT and retail analysts. In 1994, the trust generated funds from operations -- a key REIT gauge of performance -- of $29.4 million, nearly doubling figures from the previous year on a pro forma basis.
Other measures of performance such as revenues and assets also nearly doubled, to $56.5 million and $385.9 million, respectively.
For 1995, investment house Friedman, Billings, Ramsey & Co. Inc. estimates that Prime Retail's operational income will grow to $35 million, with average occupancy up to 97.5 percent, rents increasing slightly to $15.10 per square foot and total merchant sales rising to more than $800 million.
Prime also detailed plans for a new concept involving clustering sporting goods and apparel, home furnishings and electronics stores. Prime hopes to incorporate its "sports court" concept into an existing center by the end of next year, in an attempt to tap into the lucrative $60 billion a year market.
"I think the sports court concept is a terrific idea," said Rob Schwartzberg, a Friedman, Billings analyst who follows Prime Retail. "They're trying to get away from relying on women's fashion, and this represents a good alternative use."
The concept comes as retail sales generally and Prime Retail's in particular have begun to dip. Despite a total increase in merchant sales to $583 million last year, Prime's merchants' sales per square foot fell by 6.7 percent, its annual report said.
To combat that trend, Prime Retail plans to expand existing outlet centers and continue developing new outlet centers. In 1995, the company will open three additional retail centers in Georgia, Mississippi and Arizona totaling 682,000 square feet.
Other sites slated for future development include Tampa; Lebanon, Tenn.; Spartanburg, S.C.; Orlando; Salt Lake City and Puerto Rico.
"There's been a falloff in consumer sales in the past two quarters, and some manufacturers have slowed down their development plans, but we still expect to expand by one million square feet a year," said Michael W. Reschke, the company's chairman.